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Don’t delay, overpay your mortgage today

Don’t delay, overpay your mortgage today

Category: Mortgages

Updated: 21/04/2011
First Published: 21/04/2011

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Homeowners have not been overpaying on their mortgages, despite low interest rates making it the ideal time to quickly reduce the size of their debt.

Mortgage lenders told the Bank of England they did not experience 'widespread overpayments' of mortgages last year, even though the monthly repayments were relatively low on some variable rate mortgages which were arranged prior to the financial crisis.

Lenders gave a wide range of reasons as to why borrowers might have passed the golden opportunity up.

These included a squeeze in disposable incomes and the growing number of people out of work.

It was also suggested some people had chosen to save any extra money they might have rather than pay more off their mortgage.

The revelation backs up recent research which suggested millions of homeowners were missing out on the chance to take years off their mortgage.

Barclays said only one homeowner in ten had taken up the option to overpay.

Those homeowners who are not overpaying have been urged to start if they can afford to whilst interest rates - and many tracker mortgage monthly repayments - are still low.

The average overpayment is currently £200.82, which on a mortgage of £150,000 over 25 years could see the term reduced by seven years and three months.

However, overpaying by even a small amount can have a huge impact - on the same typical mortgage, an extra £50 per month would reduce the term by two years and four months.

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