A boost in UK savings as a result of reduced expenditure on travel and leisure during lockdown could be the key to cutting thousands in interest and months from the terms of mortgages, according to research1.
With Bank of England figures suggesting Brits saved an extra £200bn during lockdown, overpaying on your mortgage could prove more fruitful than squirrelling away this cash into low interest savings accounts.
It is estimated that fewer than half of people take advantage of overpayments, despite most mortgages allowing borrowers to overpay on either a regular or ad hoc basis without penalty. Yet paying an extra £90 a month towards a £200,000 mortgage from the first payment onwards would reduce the loan’s total cost by more than £16,800 and the term by more than three years, says the data.
Overpayments don’t have to start early in the mortgage to make a noticeable impact either. Paying an extra £90 each month from the mortgage’s 10th anniversary could still save £5,300 in interest and shave 18 months off the term.
Mortgage overpayments won’t be suitable for everyone, however, and you should consider your personal and financial circumstances first.
As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments.