Homeowners are taking advantage of low interest rates to overpay their mortgages to the tune of £9 billion a year.
One in five mortgage holders are currently overpaying every month, according to new research from Santander Mortgages published today.
That's a total of 2.5 million people, who each overpay on average £181 every month.
Another 6% make a one-off overpayment on their mortgage once a year, while 9% don’t regularly overpay but have done so once in the past 12 months.
The two million homeowners who have made a one-off overpayment in the past year overpaid an average of £1,919 each.
One in three homeowners in total make some form of overpayment, whether monthly or on a one-off basis.
The research also showed that 54% of regular over-payers have just started doing so in the past two years, to take advantage of low interest rates.
Yet many borrowers don't realise they can overpay their mortgage. Some 23% had no idea if their mortgage provider allowed overpayments at all, while a further 14% said their provider allows overpayments but aren’t sure if they charge for them.
Another 8% said their mortgage provider definitely charges customers for making overpayments.
Santander, which offers its customers the freedom of overpaying on their mortgage whenever they wish, suggests that borrowers should take advantage of low interest rates.
Its research shows that one in three people who don't make mortgage overpayments could afford to do so, paying an average 18% extra.
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 it.
"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 is just 1.6%, in the long-term they may be better off using this money to make mortgage overpayments instead.”
Santander allows customers to make unlimited overpayments on its Tracker and Flexible Offset mortgage range.
Comments