Most People Not Overpaying On Home Owner Loans
With interest rates on home owner loans as low as they are at the moment and with the prospect of an increase in loan rates sooner rather than later, it would seem like now is an ideal time for borrowers to be making overpayments on their home owner loan or mortgage.
But a new survey conducted by Barclays bank, has found that around 84 per cent of home owner s are currently not making any overpayments on their loan at all, despite the fact that the majority of these individuals have seen their monthly loan repayments fall significantly over the course of the past two years.
The survey found that only 10 per cent of borrowers are currently overpaying on their home owner loan, although a further 6 per cent say that they intend to start doing so this year. Despite these low figures, almost a quarter of those interviewed said that they intended to repay their loan early.
Even people who have an early redemption penalty on their home owner loan or mortgage, could still overpay, as many of these loan deals will still allow overpayments of 10 per cent a year without penalties.
Of those borrowers who are overpaying on their loan, the average additional payment is around £200 per month, which could reduce the loan term of a 25 year, £150,000 mortgage, by 7 years and three months.
Andy Gray of Barclays said “we’ve seen a modest increase in the amount borrowers are overpaying on their mortgage in the first two months of this year, compared to the same period last year.”
“We are still experiencing low interest rates and mortgage affordability is at its best levels for more than a decade so we would urge borrowers who can afford it, to start overpaying now, as putting an extra £100 to their mortgage each month will pay off their loan four years earlier and reduce the amount of interest that is paid.”
