Homeowner loan Repayment Advice From CML
Since the beginning of October last year, the Bank of England has reduced the interest base rate on homeowner loans by 3.5 per cent.
In practical terms, this means that a borrower who has an average sized homeowner loan of £150,000 and is benefiting from the full amount of the rate reduction, through opting for a tracker loan, perhaps, will have seen their monthly loan repayment amounts go down by an incredible £437.50 per month since September last year.
Bernard Clarke from the Council of Mortgage Lenders (CML) has offered some good advice to anyone who is currently enjoying the reduced payments on their secured loan or mortgage.
He has joined with a growing number of experts who are advising borrowers to make regular overpayments on their homeowner loans in order to reduce the outstanding balance much quicker than they would have done normally. By overpaying by even a small amount each month, it is possible to make significant savings on future interest payments and reduce the term of the loan by several years, depending on how much is being overpaid.
For borrowers who are still earning the same income as they were last year, this is an excellent way to get in front with homeowner loan repayments.
However, for someone who may have other outstanding debts, such as credit cards and personal loans, it may be advisable to repay these before the mortgage, as they are likely to charge a much higher rate of interest.
Also, a homeowner should check with their own lender prior to making overpayments to ensure that there are no early repayment penalties applicable to their loan. Borrowers already appear to be taking advantage of this opportunity as Lloyds TSB have reported that they have received somewhere in the region of 27,000 requests to make overpayments from their customers.
