Co-op Bank launches overpayment scheme

1 December 2009 | By Natalie Thomas

It is being offered to customers who have made significant overpayments in 2009, with a minimum acceptable capital repayment of £500.

Capital repayments will sit outside the normal overpayment scheme and will offer a permanent reduction in the capital outstanding, immediately reducing the outstanding balance of the mortgage.

Under the pilot scheme borrowers will be able to secure lower rate products normally available for lower LTVs, and reductions in monthly payments and/or the term of the mortgage.

The Co-op Bank has seen the number of its customers making mortgage overpayments surge 56% compared to this time last year.

Its research shows that borrowers on variable rates are the most likely to overpay, and are three times more likely to overpay than those on fixed rate deals.

The Co-op Bank says that most borrowers within their initial mortgage deal period are allowed to make overpayments of up to 10% of their mortgage balance per year, without any penalties, and customers on lifetime trackers and standard variable rates have no restrictions on overpayments.

Terry Jordan, head of mortgages at The Co-op Bank, says, “With interest rates continuing to remain at the current low level, we have been following developments in this area closely.  

“Our data shows a real trend in the number of customers electing to make overpayments and as a result we have decided to offer those customers that are already significantly overpaying the chance to take advantage of the current low rate environment by making additional repayments without penalty, in the form of capital repayments.

“With many economists predicting that the interest rate environment will remain low into 2010 we will be monitoring this pilot scheme in detail, with a view to rolling out to across more customers next year if successful.”

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