Homeowners find spare cash for mortgage overpayments

27 August 2008 / by Rachel Mason
Despite rising household bills and escalating food costs, 12 per cent of mortgage holders are planning to make overpayments on their mortgage over the next six months.

According to Abbey Mortgages, more than one in 10 are bucking the trend, and instead of scraping money together to pay for the ever rising cost of living, actually have spare cash to make overpayments.

This figure is three times the amount of those who are struggling so much that they are planning a payment holiday or underpayments.

And the trend is even higher in the South East, where a massive 17 per cent of people are planning an overpayment over the next six months; this is more than eight times the number planning to make an underpayment – just two per cent.

Overpaying on a mortgage can not only save homeowners money on the interest payments, but can also see a mortgage paid off a lot sooner.

For example, on a £100,000 mortgage, taken out over 25 years on a fixed rate of 6.5 per cent, an overpayment of just £20 a month would save £8203.78 and shave 1.7 years off the life of the mortgage.

If this overpayment was taken up to £50 a month, the mortgage would be paid back in just over 21 years instead of 25 and the saving would be £18,104.

And, if £100 extra a month could be found, the savings would be six and a half years and £30,391.

Abbey says the figures are encouraging, and show that paying off the mortgage is still the top priority for many families.

"A large proportion of mortgages offer borrowers flexibility and the research shows that many people are planning to take advantage of these benefits," said Phil Cliff, director of Abbey Mortgages.

"It's great to see that people are quite rightly prioritizing their mortgage payments ahead of other financial commitments. Having a smaller mortgage can mean you get a better deal when you remortgage and of course reduces future monthly outgoings," Mr Cliff concluded.

Find out more about flexible mortgages.

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