Mortgage overpayments increase according to Lloyds Banking Group

Lloyds Banking Group have reported that twice as many people made overpayments to their variable mortgages in 2009 than in 2008.

According to the figures, 14% of Lloyds Banking Group customers paid more than the minimum amount towards their mortgage in 2009.

Lloyds Banking Group have said that due to historically low interest rates, they have seen a large rise in mortgage overpayments. Those who have a variable rate mortgage have greatly benefited from the low interest rates and have subsequently opted to overpay – decreasing their mortgage.

Individuals with a £100,000 mortgage have seen monthly repayments drop by around £275 as the base rate fell from 5% to the record low of 0.5%. Working on this basis, an overpayment of just £50 on a 3.5% interest rate could work out as a saving of £7,500. Another way of looking at this is that by making this small overpayment you could reduce your 100,000 mortgage term by three and a half years.

With the Bank of England holding the base rate so low, borrowers are seeing the opportunity to cash in, reducing their overall loan and making significant savings in the long term.