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Officials encourage mortgage overpayments

March 6, 2009 by admin  
Filed under News, News-Mortgages

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A number of have recently highlighted the benefits of overpaying on a mortgage, stating that borrowers could benefit hugely by taking advantage of the lower and making higher than necessary repayments on their mortgages.

A number of banks have said that an increasing number of mortgage borrowers have been overpaying on their mortgages lately by keeping repayments the same even though the base interest rate has dropped to just 1 percent.

Over the past five months the base interest rate has plummeted from 5 percent to just 1 percent, which is the lowest in the history of the Bank of England. However, instead of reducing their monthly repayments on their mortgage loan, many people have asked their banks to leave their repayments as they are, thus using the additional cash to clear their mortgage more quickly.

Industry experts have said that there are two main benefits that borrowers will enjoy by overpaying on their mortgages in this way. The first is that they will be able to clear the mortgage debt for more quickly, as overpayments like this could shave years off the mortgage term. The other main benefit is that they will save a fortune in interest over the term of the loan, with many savings tens of thousands of pounds in interest.

The government has been reducing the base interest rate over the past five months in the hope that the lower repayments and borrowing costs would help to boost consumer spending, revive the economy, and stave off recession. However, it seems that many people have decided to use the savings wisely by trying to reduce their debt rather than on general spending.

Tags: fortune, base, interest, bank of england, england, industry, industry officials, interest rates

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