Homeowners opt out of overpaying on their mortgage

A Comparethemarket survey found that more than half of the people making overpayments were weighing up their options to either discontinue or reduce this in excess over the next year.

Reduce the life of your mortgage and save money by either topping up or making a one-off payment to your lender each month. Doing so will put you in good stead for years to come, leaving you with fewer financial burdens along the way!

On the whole, lenders let borrowers pay over 10% of their loan amount. But there are also special mortgages granting greater access to higher payments or more flexible lump sums.

Homeowners are well aware of the power of overpaying, as it can help to quickly reduce the debt associated with their mortgage. However, when interest rates suddenly rose last year due to market turmoil, several individuals on fixed-rate mortgages decided that this was a great way for them to reduce their loan balance ahead of time and get more favourable deals upon remortgaging.

Unfortunately, the recent Bank of England interest rate hikes to 4% have caused a significant burden on those who recently remortgaged. This has drastically limited their ability to make extra payments each month.

Comparethemarket unveiled that before the recent rate hikes, more than half (54%) of those with mortgages overpaid each year in varying degrees. However, following these increases, one-tenth (10%) have decided to decrease or discontinue their extra payments altogether.

According to the research, monthly overpayments are currently averaging at £421 and lump sums stand at a whopping £975.
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Reasons Why Homeowners May Choose to Forgo Making Additional Payments on their Mortgage

With nearly ninety percent (86%) of respondents citing it as the primary factor, cost-of-living pressures have been key in eliminating overpayments.

They confided that their bills and mortgage payments were becoming increasingly difficult to manage, so they turned to building an "emergency fund" with whatever little money was left.

To cover their mortgage payments, an overwhelming majority of homeowners (82%) have reduced or eliminated household expenses. Unfortunately, many had to choose between essentials like food; a third of respondents (34%) reported having to limit grocery purchases.

Mortgage holders have had to reduce spending on occasions such as dining out (46%), purchasing clothing (42%), and enjoying leisure activities (40%) due to their financial obligations.

To meet the demands of repayment, many borrowers have decided to increase their household income. Around thirty percent are using cash back and rewards as a means of budgeting, while another twenty-nine percent have sold unwanted belongings in an effort to do so. Even more impressive is that 23% of individuals with debt have taken on extra hours at work or applied for higher-paying positions!
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Discover How to Maximise Your Savings with Overpayments

Alex Hasty, CEO of Comparethemarket, said: “With potentially more base rate rises to come, those who are still able to overpay on their mortgage may not feel as confident doing so later this year.”

However, he also provided advice for anyone who desires to lower their mortgage debt via overpayments before resorting to remortgaging.

“For those who are able to do so, overpaying on your mortgage can save a significant amount of money in the long term,” he explained.

“It’s important to carefully consider your mortgage agreement before deciding to overpay your mortgage, as you could be charged extra by your lender.

“To help relieve financial pressure, it’s also worth reviewing other household bills too to see where you could save.

“For example, households could save up to £374 on motor insurance and up to £159 on home insurance by switching through Comparethemarket.”