As borrowers begin to see the advantages that overpayments can bring, more and more people are realising the benefits. On a 100,000 mortgage with a rate of 3.5%, overpaying by just 50 per month will reduce the term of a mortgage by three years and six months, as well as save a customer 7,610.00 in interest.
Across Lloyds TSB and Halifax in 2009:
- The proportion of customers with a variable rate mortgage who have opted to overpay doubled from 7% to 14%.
- The average overpayment increased from 269 to 336.
- The average monthly payments of those overpaying is still 50- 1 less per month than it was before base rate fell.
These growth statistics follow on from the recent economic trends analysis released by the Bank of England which revealed households in Britain are now injecting more equity into their homes.
Stephen Noakes, commercial director of mortgages, Lloyds Banking Group said:
The data shows that more and more borrowers are seizing the opportunity to overpay whilst in a low base rate environment. There has never been a better time for our customers to join the trend. Not only does overpaying help homeowners take years off their mortgage but it also makes significant savings over the long term.
Responding to customer appetite for increased overpayments, Lloyds TSB and Halifax recently announced that all customers with a variable rate mortgage can overpay their mortgages by up to 20% with no financial penalty. Up from 10%, this concession should help sustain the current trend of more customers overpaying on their mortgage.
The scheme will last until 31 March 2011 and underlines the Bank's commitment to help its customers gain maximum advantage from the current low rate environment.
