Mortgage holders can overpay 'to take make the most of low rates'

Date:Monday 7th December 2009
Author: Max Freedman

Making overpayments on a mortgage has several advantages to the holder, according to one industry expert.

Bernard Clarke, a spokesperson for the Council of Mortgage Lenders, said that for borrowers on variable-rate mortgages, there may well have been a drop in borrowing rates due to the reduction of the Bank of England base rate. Therefore, there is the possibility of them paying back the mortgage sooner than planned.

He added that by continuing to pay off a variable-rate mortgage at its original rate, before the base rate fell, people will see the mortgage cleared faster than if the holder decided to reduce their payments in line with the fall in the base rate.

Mr Clarke's comments followed the publication of survey results by the Independent newspaper, which found that mortgage lenders are increasingly seeing their product holders choosing to pay back more of their loan each month than before the base rate cut.

While most lenders already offer a ten per cent overpayment on loans, some are considering raising the threshold to allow higher overpayments to be made.