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Mortgage holders are failing to save money by overpaying

Record low interest rates are being frittered away by borrowers who are failing to make overpayments, according to new research by professional advice website Unbiased.co.uk.

Many tracker and standard variable rate mortgage borrowers have been sitting pretty with lower monthly payments since the base rate fell to 0.5 per cent in March last year. "This has presented many with the ideal opportunity to pay off their outstanding mortgage more quickly, or enjoy a greater level of repayment comfort down the line," says Karen Barrett, right, chief executive of Unbiased.

The study shows that only one in 10 tracker mortgage holders are overpaying on their home loans. Of those not overpaying, two-thirds are using the money to pay off other debts and 24 per cent are spending it on day-to-day expenses. One in 10 are putting the cash in their savings accounts.

"We are encouraged by the increasing numbers who are using their repayment savings to erode their credit card and loan debts. However, those who are putting the extra into a savings account are missing out," says Ms Barrett.