More than three quarters of borrowers missing chance to reduce mortgage term



Barclays Survey Finds Majority of Borrowers are Missing out on Early Repayment of Mortgages

Barclays Survey Finds Majority of Borrowers are Missing out on Early Repayment of Mortgages

A recent survey by Barclays has revealed that 85% of borrowers are missing out on the opportunity of reducing their mortgage term by overpaying their mortgages.

A small 10% of homeowners are only overpaying their mortgages while the base rate is being kept at a historical low of 0.5% by the Bank of England. Another 6% of borrowers claimed that they will start overpaying from this year.

Surprisingly enough, 24% of the borrowers said they plan to pay off their mortgages early while more than 12% said they hope to reduce their mortgage terms to less than 15 years.

The research found that the average overpayment amounted to £200.82 per month, which can reduce the term of a 25 years loan of £150,000 by 7 years and three months. Even a small overpayment of £50 per month will reduce the term by two years, Barclays said.

“We’ve seen just 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”, said Andy Gray, head of mortgages at Barclays.

“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 mortgage four years earlier and reduce the amount of interest that is paid”, he said adding that even if rates are hiked at a later date, borrowers manage to pay off more than they think they can afford.

“A homeowner on a typical £150,000 mortgage tracking at 2.49% above base rate would see their monthly mortgage payments increase by around £20 a month for each 0.25% increase in base rate. Borrowers will therefore benefit overpaying by as little as £50”, he emphasized.

“A homeowner on a typical £150,000 mortgage tracking at 2.49% above base rate would see their monthly mortgage payments increase by around £20 a month for each 0.25% increase in base rate. Borrowers will therefore benefit overpaying by as little as £50”, he advised.

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