Just 10% of homeowners overpaying on their mortgage

16 March 2011 | By Tessa Norman

The survey of over 1,000 borrowers also reveals a further 6% are planning to start overpaying this year.

Barclays says this means 84% of borrowers could be missing out on the opportunity to shave years off their mortgage by overpaying even by small amounts.

The lender is urging those who are not overpaying to start now if they can afford to while interest rates are low.

According to the research, the average overpayment is £200.82, while 24% of borrowers aim to pay off their mortgage early and of those, 56% hope to reduce their mortgage term to 15 years or under.

Andy Gray, head of mortgages at Barclays, says: “We’ve seen just a modest increase in the amount borrowers are overpaying on their mortgage in the first two months of this year compared to the same period last year.

“We are still experiencing low interest rates and mortgage affordability is at its best levels for more than a decade so we would urge borrowers who can afford it to start overpaying now.

“Even with the reality that interest rates will start to rise at some point, many borrowers are likely to be able to afford a little more than they think.

“A homeowner on a typical £150,000 mortgage tracking at 2.49% above base rate would see their monthly mortgage payments increase by around £20 a month for each 0.25% increase in base rate. Borrowers will therefore benefit overpaying by as little as £50.

“I’d urge all homeowners to review their current mortgage arrangements to ensure their repayments remain affordable throughout 2011 and beyond and to ensure they have a contingency plan when interest rates start to increase. This could be as simple as remortgaging.”

If you enjoyed this article, sign up here to receive daily email updates from Mortgage Strategy and Follow @mortgagestrat