Mortgage repayments now account for just 12% of household income, down from 28% in 19902. Charcol calculates that if a borrower with an average mortgage of £67,0003 were to repay an extra £600 of outstanding capital each year (the equivalent of overpaying by a mere £50 a month), they could save £11,297 in interest and own their home outright 5 years early1. Simply by repaying an extra £600 this year alone, the same borrower would save £1,3681. Of course, the more you invest the more you can save.
Ray Boulger at Charcol says, “Overpayment features are a natural evolution in a period of sustained low inflation and low interest rates are not merely limited to flexible mortgages. Around three quarters4 of new mortgage deals now offer the facility to overpay anything from 5% upwards of the mortgage penalty free with the majority of lenders offering a 10% penalty free part repayment facility.”
“Inflation isn’t diminishing the relative value of debt as it did back in the 70s and 80s, so people have to do the job themselves. But in this era of low interest rates, tens of thousands of homeowners could afford to make substantial overpayments, thereby knocking thousands off the overall cost of repaying the loan and owning their home outright that bit sooner.”
