Homeowners are urged to overpay their mortgage while interest rates are still low
Low interest rates are encouraging borrowers to clear their home loan, but more should do so, says Simon Read
One in five mortgage holders are currently overpaying their loan each month, but more should get into the habit, experts believe.
Phil Cliff, director of mortgages at Santander UK, said: "If you overpay on your mortgage, you will pay less interest over the full term, so it's a good thing to do if you can afford to."
The lender has researched how many borrowers have responded to the record low interest rates, and the results are encouraging. The survey suggests 2.5 million people overpay around £181 every month, meaning they collectively pay an additional £455m on top of their standard mortgage repayments on a monthly basis.
Another 6 per cent tend to make a one-off overpayment once a year, while a further 9 per cent have overpaid once in the past 12 months.
But Jonathan Harris, director of mortgage broker Anderson Harris, said even more borrowers should think about overpaying their mortgage.
"Most lenders will let you overpay by up to 10 per cent of the mortgage amount each year, so it makes sense to take advantage of this while interest rates are low, particularly if you have savings sat in an account not earning much in the way of interest," he said.
"Overpaying saves you interest in the long run and reduces your mortgage term, ensuring you clear your mortgage debt more quickly. It will also reduce your loan to value, making it easier to remortgage when the time comes."
Ben Thompson of the Legal & General Mortgage Club said: "It's good to see mortgage borrowers taking a sensible approach when it comes to overpaying on their mortgage. At the moment interest rates are at historic lows. With the base rate remaining unchanged for coming up to five years, and initiatives like the Funding for Lending Scheme keeping the costs relatively low for lenders, there has never been a time when mortgages have been cheaper.
"However, that will inevitably change. Speculation continues about exactly when we will see the Bank of England increase interest rates," Mr Thompson added. "Many commentators have suggested that 2016 looks most likely. But it is clear that the Bank of England will leave it as late as possible as they seek to unwind quantitative easing.
"Borrowers should take the opportunity to build an equity buffer for when base rate moves and inevitable interest rate rises follow. This will help to insulate against any potential interest rate shocks."
Independent Partners: Get fee-free expert mortgage advice and find the right mortgage deal for you.
- 1 Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
- 2 Christians: The world's most persecuted people
- 3 The secret report that helps Israelis to hide facts
- 4 Danish TV reporter is all business up top, all party down below
- 5 Denmark bans kosher and halal slaughter as minister says ‘animal rights come before religion’
The secret report that helps Israelis to hide facts
A day in the life of Vladimir Putin: The dictator in his labyrinth
A new Russian revolution: The cracks are starting to appear in Putin’s Kremlin power bloc
Were 'Poor Doors' added to mixed developments so wealthy residents don't have to go in alongside social housing tenants?
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Woman and two children killed by mob in riots over 'blasphemous' Facebook post in Pakistan
iJobs Money & Business
£17 - £20 per hour: Cameron Kennedy Recruitment: My client, one of the worlds ...
£600 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, SQL Server, ...
£300 - £600 per day: Harrington Starr: Risk Analyst Access, EXCEL, VBA, RISK, ...
Negotiable: Harrington Starr: Market Access Analyst (FIX On-boarding, FIX 5.0,...
Day In a Page
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000