7 Feb

Reduce term, mortgage holders advised

Reduce term, mortgage holders advised

Homeowners have been advised to use February's interest rate cut to reduce their repayment period.

Julia Harris, an analyst at Moneyfacts.co.uk, says reinvesting savings on variable rate or tracker mortgages could save £4454.81 on the average £100,000 mortgage with 15 months cut off the mortgage term.

She warned that a small number of mortgage holders might be prevented from doing this by lenders, but Moneyfacts figures showed 84 per cent of mortgages permitted overpayments.

"If the interest is charged daily or monthly and you overpay every month, you will see the amount you overpaid come off your mortgage as you pay it," she said.

The Bank of England's monetary policy committee (MPC) voted to reduce the base interest rate from 5.5 per cent to 5.25 per cent on February 7th, citing the necessity to meet the inflation target of two per cent.

Higher food and energy prices were a factor in the MPC's decision, it stated.
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