A typical UK borrower who took out a new tracker mortgage in October 2008 for £112,756 (source: CML) over 25 years, is now saving £218.08 per month compared to their initial payment. Adding this sum to mortgage payments for the rest of the term would reduce interest costs by £13,817 and pay off the mortgage 9 years and 3 months early.
Martijn van der Heijden, HSBC's head of mortgages commented; "Tracker customers have seen their rates fall three and a half per cent in just four months. It is absolutely in their favour to make real use of today's historically low interest rates. Overpaying their mortgage could reduce its term by years and save them thousands of pounds in interest.
"Equally there is also a genuine danger for homeowners in allowing their lifestyles to become accustomed to the current low rates. Interest rates will increase at some point and it will feel painful for those borrowers who have soaked up the benefit of lower mortgage payments by extending their spending habits."
HSBC's first tranche of letters will be sent to tracker and variable rate borrowers who have less than 25 per cent equity in their home, as it is these customers who will benefit the most from speeding up the repayment of their capital sum. The majority of homeowners will have seen some of the equity in the homes eroded through the falling house prices, topping up their equity share will maintain their ability to access better value mortgage deals if or when they choose to remortgage.
How much can customers benefit by overpaying?
Based on a tracker rate of 3% and a customer borrowing £150,000 over 25 years
Monthly Overpayment - Reduced term by - Saved interest costs
£100 - 4 years 3 months - £11,842
£200 - 7 years 3 months - £19,894
£300 - 9 years 6 months - £25,738
£400 - 11 years 3 months - £30,181
Borrowers keen to make use of regular overpayments need to contact HSBC's mortgage service centre on 0845 766 2255 or visit their local branch to discuss increasing their monthly payment. One off payments can be made via HSBC's personal internet banking facility.
HSBC was named the most competitive mortgage lender of 2008 by mform and has pledged to double its 2007 level of mortgage lending this year by making £15 billion available to customers.
The bank's new Tracker mortgages are amongst the best available with rates starting at 4.09 per cent for borrowers who have a 25 per cent deposit, falling to just 3.45% for customers with at least 40 per cent equity in their home.
A selection of HSBC current mortgage range:
Mortgage - Rate - Max LTV - Booking fee
Standard mortgages:
lifetime tracker with fee - 4.09% - 75% - £599
lifetime tracker with no fee - 4.39% - 75% - £0
Special fixed mortgage:
2 years - 3.99% - 60% - £999
Special Premier discount mortgage:
2 years - 2.99%* - 60% - £999
Special tracker mortgage:
lifetime tracker - 3.45% - 60 % - £799
* Rate from 6th February 2009
