Homeowners not using Low Interest Rates to Overpay Mortgage!

publication date: May 5, 2010
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Homeowners not using Low Interest Rates to Overpay Mortgage!

Research by Unbiased, reveals over two thirds (63%) of borrowers on a tracker mortgage are not taking advantage of the low interest rates to overpay on their mortgage*.  This has risen from just over half (53%) of borrowers in May 2009**.  Only one in ten (11%) are making occasional overpayments on top of their current monthly payments.

Perhaps showing that people are struggling more than we thought, or aiming for a higher lifestyle than they can really afford, the research found that only two thirds of tracker mortgage holders are not taking advantage of low rates to overpay on their home-loan and of these, a third are using the extra money to pay off other debts, while a quarter (according to Unbiased) “are frittering cost savings away on day-to-day expenses”.

Despite interest rates on savings accounts remaining at an all time low, over one in ten (13%) are putting the extra money into their savings pot and 4% are treating themselves to an extra treat, such as a holiday.  This all might help the economy in the short term, but it does mean that there is going to be further pressure on the economy once interest rates start to rise.

Of the tracker mortgage borrowers surveyed, just 13% have deliberately maintained their mortgage repayments at the same levels they were paying before the base rate was cut to 0.5% in March 2009.  This has fallen from one in five (20%) who were taking advantage of overpaying on their mortgage in May 2009.

Karen Barrett, Chief Executive of Unbiased comments: “With the base rate remaining at an all time low of 0.5% since March last year, many tracker and standard variable rate mortgage borrowers have enjoyed prolonged lower monthly payments.  This has presented many with the ideal opportunity to pay off their outstanding mortgage more quickly, resulting in years being taken off their overall mortgage repayment term, or enjoy a greater level of repayment comfort down the line.  It is worrying to see that instead of taking advantage of the historic low base rate, our tracked research shows there is an increased trend of people failing to overpay on their monthly mortgage payments".

* Opinium Research carried out an online poll of 2,005 British adults from 20th to 23rd November 2009.  Results have been weighted to nationally representative criteria. 

** Opinium Research carried out an online poll of 2,026 British adults from Friday 15th to Tuesday 19th May 2009.  Results have been weighted to nationally representative criteria.

Having trouble paying your mortgage? Then take a look at our article 'I Can't Pay my Mortgage'.

If you need to find a new mortgage or require independent mortgage or financial advice, contact us or tel 0845 838 1763 so we can put you in touch with independent financial advisors to help you make the right decision.

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