Research by unbiased.co.uk suggests that more than half (53%) of borrowers who say they are on a tracker mortgage are still not taking advantage of the low interest rates to overpay on their mortgage. Of the tracker mortgage borrowers surveyed, just one in five (20%) have held repayments at the levels they were before the round of rate cuts earlier this year, enabling them to take full advantage of the opportunity to reduce the amount outstanding and term of their mortgage.
Nearly a one in five (19%) of those tracker borrowers not overpaying are spending their monthly repayment windfall on day-to-day expenses or treating themselves, while a more sensible 24% say they are diverting these savings to pay off other debts. 7% say they are allowing the balance to build up month by month in their current account, and 20% are bolstering their savings in deposit accounts.
Worryingly, over one in ten (12%) are not overpaying on their mortgage for fear that they will be charged for doing so.
David Elms, chief executive of Unbiased.co.uk commented: "Tracker and standard variable rate mortgage borrowers have watched interest rates plunge to record lows during this year, presenting an ideal opportunity to pay off their outstanding mortgage more quickly. Such action would enable many thousands of borrowers to take years off their mortgage repayment term, or enjoy a greater level of repayment comfort down the line, should the economy take longer to recover.
"Our research suggests most tracker borrowers are not taking this action, however we're encouraged by the large number who are using their repayment savings to erode their more costly credit card and personal loan debts.
"If you are confused about how to best manage your mortgage and take advantage of low interest rates, professional and personal mortgage advice can make a clear difference. Only a whole of market mortgage adviser will be able to advise borrowers on the best deal for their circumstances."
