Increase in people making overpayments

A number of banks have reported that there has been an increase in the number of homeowners that are overpaying on their mortgage loan each month, as many have decided to take advantage of the huge drop in the base interest rate and use the additional money to overpay on their mortgage.

Borrowers will find that by keeping their repayments the same even though interest rates have dropped they could cut years from their mortgage term and could also save thousands of pounds in interest over the term of the loan. Industry officials are advising consumers to overpay wherever possible to save themselves money and get out of debt more quickly.

The Council of Mortgage Lenders has said that those people that were making these overpayments would quickly see the benefits, and said that it was a very sensible practice. The CML also said: “Now is also a good opportunity for borrowers on interest only mortgages to switch to repayment mortgages to use this period of low interest rates to start to pay down their loans.”

Officials from Lloyds TSB have said that since the end of last year, which is when the base interest rate started to come down, an increasing number of homeowners have been making enquiries with regards to making overpayments, and many have asked for their monthly repayments to remain the same even though the base rate has now fallen to just 1 percent.