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Homeowners choosing not to overpay mortgages

Homeowners choosing not to overpay mortgages

Category: Mortgages

Updated: 28/04/2010
First Published: 28/04/2010

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Increasing numbers of homeowners on tracker deals are shunning the chance to shave years off the time it will take to pay off their mortgages.

Many lucky Britons on trackers have benefited from dwindling interest repayments since the Bank of England slashed the base rate to 0.5%, giving them the chance to overpay on their home loan deals.

However, increasing numbers of people are choosing not to take the opportunity to pay more off their mortgage, figures from unbiased.co.uk have revealed.

Almost two thirds (63%) of respondents with tracker mortgages are just paying the minimum amount necessary, up from 53% in May 2009.

Just 13% of those with trackers have maintained their payments at the levels they were paying before the base rate was cut. This has fallen from 20% of people in the last year.

More than one in four (28%) homeowners are using the money they are saving to pay off other debts, but a similar number are using the extra funds to pay for day-to-day expenses.

Despite the low interest rates, 13% said they had put the money saved on mortgage interest repayments into a savings pot, while 4% are using it to pay for extra treats, such as holidays.

"It is worrying to see that instead of taking advantage of the historic low base rate, our tracked research shows there is an increased trend of people failing to overpay on their monthly mortgage payments," said Karen Barrett, chief executive of the website.

"We are encouraged by the increasing numbers who are using their repayment savings to erode their more costly credit card and personal loan debts.

"However, those who are instead putting the extra into a savings account are missing out, as interest rates on savings also remain at a record low."

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