More people overpaying on their mortgages
February 12, 2009
According to a recent report the number of people that are overpaying on their mortgages is on the rise, with many taking advantage of the recent base interest rate cuts and using them to try and clear their mortgage debt faster, as well as to try and save a fortune in interest on their mortgage loan. Officials from Lloyds TSB have said that since November, when some of the more dramatic interest rates cuts from the Bank of England started to kick in, around 27,000 customers have made enquiries about overpaying on their mortgage.
The Council of Mortgage Lenders has stated that it encourages consumers to overpay on their mortgage if possible, and many have done this through asking the bank not to change their monthly repayments even though the cut in interest rates means that their repayments would otherwise have gone down.
The CML also said: “Now is also a good opportunity for borrowers on interest only mortgages to switch to repayment mortgages to use this period of low interest rates to start to pay down their loans.”
Many financial advisors have been advising consumers to take advantage of the lower rates and use the opportunity to try and repay more than the required amount on their mortgage each month.
They have advised that by doing this the consumer can increase the amount of equity in their home at a time when house prices are falling and equity levels are dropping, can save thousand of pounds in interest compared to what they would otherwise pay, and can reduce the term of their mortgage loan significantly.
The base interest rate has plummeted from 5 percent in October to its lowest level in history, at just 1.5 percent in January. There are rumours that the base rate will continue to fall, and some predict that it could hit zero over the course of this year.
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