More than £9 billion mortgage overpayments made every year
Gross mortgage lending shows strongest performance in five years
Alex Johnson has been part of The Independent's online team since 2007. He has been writing about microarchitecture on his internationally-acclaimed Shedworking blog since 2006 and is the author of Shedworking: The Alternative Workplace Revolution. His latest book is Bookshelf, published by Thames & Hudson.
Wednesday 20 November 2013
Around 19 per cent of mortgage holders overpay every month, according to figures from Santander Mortgages, while 6 per cent overpay once a year and a further 9 per cent overpay on an ad hoc basis.
The findings suggest that many have started overpaying to take advantage of low interest rates. Thirteen per cent of those who overpay every month started doing so in the past six months, 24 per cent within the last year and 54 per cent within the last two years.
However, a quarter of mortgage holders have no idea if their mortgage provider allows overpayments at all.
Phil Cliff, Director of Santander Mortgages, 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. Nearly half of those people who have never overpaid on their mortgage still put money into savings each month, and given the average interest rate on these people’s savings accounts, in the long-term they may be better off using this money to make mortgage overpayments instead.”
Those who have made a one-off overpayment in the past year overpaid an average of £1,919.
Meanwhile, The Council of Mortgage Lenders estimates that total gross mortgage lending increased to £17.6 billion in October, a rise of 9 per cent from £16.2 billion in September and 37 per cent higher than the total of £12.9 billion in October last year. It is the highest monthly estimate for gross lending since October 2008 (£18.6 billion).
CML chief economist Bob Pannell said: "Housing activity is set to strengthen further in the short-term, and to contribute materially to overall economic growth. Combined with the Bank of England’s recent optimism about the economy, this has led some commentators to speculate that an early rate rise may be on the cards. We do not currently share this view."
Mark Harris, chief executive of mortgage broker SPF Private Clients, added: "We are coming to expect inexorable rises in mortgage lending and October's figures don't disappoint. The lending numbers have bumped around the £16bn mark for the latter part of this year, but this is the first time they have broken through the £17bn barrier.
"But let’s not get carried away. While this is the highest monthly estimate for gross lending since October 2008 at £18.6bn, it is still 5 per cent off that figure, so the recovery is still very much underway. This increase in lending will continue to fuel the debate about an early interest rate rise. However, borrowers shouldn't panic as we believe that with inflation falling close to its 2 per cent target and the economy still in recovery mode, it is unlikely that the Bank of England will risk hiking interest rates too soon."
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