The increase will apply to customers on fixed or tracker rate products
NatWest has announced that it is now allowing new and existing mortgage customers to overpay twice as much on their homes.
The high street lender is now accepting customer overpayments of up to 20%, up from 10%, without incurring an early repayment charge (ERC). This increase will apply to customers on fixed or tracker rate products.
Overpayment allowances will renew annually on the anniversary of a product draw down.
Commenting on the increase of NatWest’s overpayment allowance, Scott Taylor-Barr, financial adviser at Carl Summers Financial Services, said the change was “good news, although there are not many people who will be able to take full advantage of this new feature.”
He explained: “There are always those that can and also those that will have a windfall at some point. Being able to reduce your mortgage balance is a very sensible way of using your money, as the reduction in the total amount of interest you will pay over the mortgage term can be considerable.”
For Graham Cox, director at SelfEmployedMortgageHub.com, the announcement was a real point of difference for Natwest as most lenders only allowed 10% overpayment of the mortgage balance per year.
“Overpaying can save the borrower thousands of pounds in interest and reduce the mortgage term by years,” he said. “Of course, not everyone can afford to make overpayments, but it’s still nice to have the option, particularly as taking redundancy or receiving an inheritance can often provide the means.”
Simon Bridgland, director at Release Freedom, said the increased overpayment allowance would be a great and useful feature if a client would need it.
“It will be a bit of a headline grabber for NatWest without having to lower their rates, so I’m sure they will gain and retain more business as a result of it,” Bridgland commented. “The best part is for existing mortgage account holders, many of whom will be self-employed, who perhaps would like to utilise the feature at some point in the future.
“Will more lenders follow suit? HSBC has a similar 25% feature on some new products, but for a lender to offer it to existing clients is new to me.”
In an earlier interview with Mortgage Introducer, David Hollingworth, associate director of communications at L&C Mortgages, also said that due to the current market conditions, few customers would be able to exploit the opportunity.
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