Low Rates Mean Home Owners Cut Mortgages; PERSONAL FINANCE
Interest rate cuts are cutting years off the life of a mortgage for those able to maintain their previous level of repayments.
While the cuts in rates on tracker and SVR deals have been a blessing for many cash-strapped borrowers, some have decided to "overpay" and so shorten the length of their loans.
Lloyds TSB said this week that it had received more than 27,000 requests from customers to overpay their mortgage.
The bank, which now includes HBOS and which also trades under the Cheltenham & Gloucester brand, said it had received 7,000 overpayment requests after the Bank of England's Monetary Policy Committee cut the base rate by 1.5 per cent in November, with a further 12,500 requests made after December's one per cent reduction.
It has already received 7,900 overpayment requests during the first two weeks of January, and it expects the number of people paying off more of their home loan than is required each month to continue to grow as people get used to lower interest rates.
Lloyds said a homeowner with a pounds 150,000 mortgage who was on a tracker deal or standard variable rate would have seen their monthly repayments fall by pounds 380 a month since interest rates first began to fall in December 2007.
It said someone who took out a pounds 150,000 variable rate mortgage in November 2007,who had maintained their payments at their initial level and continued to do so for the rest of their mortgage term, would pay off their home loan 11.5 years early, if interest rates stayed at 1.5 per cent.
The trend among homeowners to repay their mortgage early was reflected in figures released by the Bank of England last month, which showed that people had repaid a record pounds 5.7billion off their home loans during the three months to the end of September. …