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Paying mortgage at old rates 'could lead to early completion'
08 February 2008
Continuing to make mortgage payments at the rate they have been over the last year could help mortgage holders finish their mortgage early, according to experts.
With various mortgage providers announcing that they would cut their variable rate mortgages in line with the Bank of England Monetary Policy Committee's decision to drop the base rate by 0.25 per cent, many people could see their mortgage repayments come down.
However, Katie Tucker of John Charcol mortgage experts claims that if customers continue paying off their home loan at the old rate, they will finish making repayments earlier than planned.
She said: "Borrowers on variable rates have seen their monthly mortgage payments increase five times in the last two years. Base increased from 4.5 per cent to 5.75 per cent, taking the typical monthly payment for a variable £100,000 repayment mortgage from £555 to £629.
"However, borrowers that have been able to afford these mortgage payments over the last year should consider keeping them at that level now, because whatever isn't paying interest will pay off the capital instead, reducing your term."
The advantage of paying more will only apply if mortgage providers allow for overpayment, and most allow between £5,000 and ten per cent of outstanding debt each month without charges.
