Research by the broker revealed that borrowers could make substantial savings in time and money by making overpayments to their mortgages. For example, it revealed that for a £300,000 mortgage, borrowers could make a saving of £35,300, and cut the mortgage down by two years and eight months.
However Charcol admitted that intermediaries should highlight the lender’s early repayment charge (ERC) policies before the borrower makes any overpayments.
Katie Tucker, from charcolonline.co.uk, said: “Most borrowers will have the ability to overpay their mortgage without incurring any ERCs, and some may not be aware of this. The most common amount which can be overpaid, without incurring ERCs is 10 per cent per year, but some lenders allow unlimited overpayments which means, that in most cases a large chunk of the mortgage can be overpaid. However, borrowers must be aware of any conditions when overpaying as breaching any terms could result in a large penalty.”
Harry Katz, principal at Norwest Consultants, believed lenders should get rid of the ERCs associated with products. He said: “Limiting mortgage overpayments for those lucky enough to be able to pay them is unacceptable. Is it ‘Treating Customers Fairly’? The Financial Services Authority should be taking a closer look at this issue.”
