Lloyds TSB has received requests from 27,000 customers who want to make overpayments on their mortgages as a result of falling interest rates.
Since the Bank of England cut interest rates again this month to 1.5 per cent, its fourth reduction in as many months, homeowners have found that their mortgage
repayments have fallen, leaving them with cash left over at the end of the month.
Instead of frittering this extra cash away, savvy homeowners are now taking advantage of the lower rates to overpay on their mortgages.
Lloyds TSB was one of the mortgage lenders
that pledged to pass on January's rate cut in full, and is fulfilling its promise this week by writing to those customers who are on variable rate and tracker mortgages
to inform them of their new lower repayment.
As interest rates
have come down in recent months, Lloyds TSB
said that is has received an increasing number of requests from its mortgage customers who want to make the most of the cheaper repayments to pay off more of their mortgage.
Having passed on all of the Bank of England's rate cuts, Lloyds TSB received 7,000 requests in November when rates fell by 1.5 per cent, and 12,000 more when they fell by a further one per cent in December.
Almost 8,000 requests were made in the first two weeks of January, and Lloyds TSB said that it expects these numbers to continue to rise as customers reassess their budgets in light of falling interest rates.
Lloyds TSB's analysis of its mortgage data since November 2007 – from which time rates have not risen, only fallen or remained static – has found that the average customer on a £150,000 mortgage is now saving £380 a month on their repayments and cut 11 and a half years off the term of their mortgage with overpayments.
For only the second time in 10 years, the Bank of England
has said that mortgage customers have paid off more mortgage debt than they have taken out, repaying a record £5.7billion in the three months up to September 2008.
Stephen Noakes, marketing director of Cheltenham & Gloucester, which is the mortgage arm of Lloyds TSB, said: "Homeowners with a tracker mortgage are hundreds of pounds a month better off. For those who can spare the extra money, making overpayments is a smart move. Not only can it trim years off your mortgage term, but with house prices falling, overpayments will help to protect the equity in your home."
Meanwhile, HSBC, is taking a more pro-active approach, writing to 30,000 of its customers to encourage them to use the money left over from lower monthly repayments to reduce their mortgage.
Martijn van der Heijden, head of HSBC mortgages
, said of the opportunity being presented to homeowners: "It is absolutely in their favour to make real use of today's historically low interest rates. Overpaying their mortgage could reduce its term by years and save them thousands of pounds in interest."
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