Commenting, Boulger said, “There has been more positive news for the housing market over the last month, such as Nationwide’s March house price index and the February mortgage approval figures from the Bank of England.. HSBC’s attempt to liven up the market for first time buyers and others with only a 10% deposit with its re-entry into the 90% LTV market gave further hope to borrowers.
“But monthly statistics are often volatile and there is still a long way to go before we see a sustained recovery, although there are increasing signs that confidence is returning to the housing market and the overhang of unsold new build flats is steadily being eaten away, albeit only by various forms of aggressive discounting.
“Borrowers with tracker mortgages should take advantage of the windfall cut in their mortgage payments by using at least some of their extra spare cash each month to pay down their debt, starting with the most expensive, or putting the money in a savings account, depending on their individual position. The priority should be to pay back any debt more expensive than the main mortgage, which probably means any second charge mortgage, credit cards or unsecured loans.
“After that the mortgage should be reduced, subject to being able to do so without incurring an early repayment charge, unless the pay rate is so low that a better net of tax return can be obtained from a savings account. For example there is no point in overpaying a mortgage on which no interest is being paid until the rate goes back up. The cash should initially be put into an instant access savings account and then withdrawn and used to reduce the mortgage when the cheap rate finishes.”
