The UK's three million tracker mortgage customers are set to save around £9 billion in mortgage repayments over the coming year thanks to the recent cuts in the base rate.
According to new research by uSwitch.com, three million people with tracker mortgages
in the UK have already benefited, thanks to cuts that have taken the base rate down to three per cent and the average tracker mortgage rate down to 3.27 per cent.
In the next month alone, uSwitch.com predicts these customers will save a collective £750million in mortgage repayments and up to £9million over the next 12 months.
Of the three million homeowners with tracker mortgages, just over 600,000 have used their savings to overpay on their mortgages by up to £260 a month; according to uSwitch.com's research this could knock up to nine years off the term and reduce interest by more than £26,000.
If these customers continue to overpay on their mortgages
for the full term, uSwitch.com predicts further savings of around £16billion.
But, says uSwitch.com, overpaying is not as easy as it might first seem, with more than 230,000 customers claiming that their provider made it so difficult to arrange overpayments that they gave up.
"The recent base rate cuts, amounting to three per cent over the last two months, have been welcome news for three million consumers on tracker mortgages," said Louise Bond, personal finance manager at uSwitch.com.
"For some home owners, the onset of the recession has meant this extra cash is the lifeline they need to pay off any outstanding bills or debts they have accumulated over the last year.
"However, with annual savings of up to £3,105 on the average tracker mortgage, people who can maintain their previous mortgage repayments should consider overpaying to reap the longer term rewards."
Ms Bond says that for many, it is tempting to splash the extra cash but urges consumers to think twice before hitting the shops, and put the money into savings accounts
"It is recommended to save the equivalent of at least three months salary, and with unemployment figures set to rise in 2009, those reaping the rewards of their tracker mortgage should consider this opportunity to build up such a buffer," she said.
"The best way to spend the extra money varies according to individual circumstances. However, consumers should grasp this long awaited opportunity to make sound financial choices for their future."Fair Investment