Almost a third overpaying mortgage
Nearly a third of homeowners have taken advantage of low interest rates to overpay their mortgage during the past year, research has shown.
Of those questioned, 29% said they had paid more than they were required to during the past 12 months, 37% of whom said they had overpaid by a total of £2,500 or more, according to money guidance website Moneybasics.co.uk.
The group said people with interest-only mortgages were more likely to have overpaid their home loan than people who had capital repayment ones.
The main reason people gave for making extra payments was that they wanted to pay off their mortgage early, cited by 53%, while 15% wanted to overpay while interest rates were low in order to reduce their future monthly repayments.
One in 10 people said they had simply kept their monthly repayments at the level they were at before interest rates started to fall. A further 7% of people said they were overpaying because they were concerned interest rates would rise and 4% said they had received a pay increase and had decided to use the extra money to pay down their home loan.
The group said the current record low level of interest rates meant many people were better off paying down their mortgage, rather than holding the money in a savings account.
It said someone who had a £150,000 repayment mortgage on which they were charged interest of 4.06% could reduce their mortgage term by two years and four months, saving £9,266 in interest, just by paying an extra £47 a month.
Homeowners who overpaid by £2,500 a year could knock seven years off their mortgage term and save £31,194.
But the group warned people to read the terms and conditions of their mortgage before making extra payments to ensure they did not incur a penalty for doing so.
Joanna Parsley, associate director of Credit Action, one of the partners behind Moneybasics, said: "With historically low interest rates and rising inflation, it is not surprising that many people are choosing to increase their mortgage payments and reap the long-term benefits of overpayment."