Owner overpayments soar to £335m: Santander

Santander says its mortgage customers have overpaid £335million on their mortgages so far this year, or more than £47.5million a week.

The bank points out that these overpayments, which are 50% higher than overpayments made at the same time last year, can have “a significant impact” on the interest that owners pay throughout the term. of their mortgage.

It says a customer currently holding a £200,000 mortgage with a 25-year term could save £877 in interest and be mortgage-free four months early with an overpayment of £10 a month.

He adds that customers who can afford a regular monthly overpayment of £100 will save £7,642 in interest and reduce the term of a £200,000 mortgage by more than three years.

The bank says a one-time payment of £5,000 on a £200,000 mortgage would save £3,181 in interest over the term of the 25-year loan.

However, some brokers believe the high rate of overpayments may come down as the cost of living is expected to rise later this year.

Earlier this month, the The Bank of England doubled the base rate to 0.5% from 0.25%the second rise from its all-time low of 0.1% in three months.

The Bank has signaled that further hikes may be on the way to tackle inflation, which hit a 30-year high of 5.5% this week, with the central bank predicting it will peak at 7.25% in April.

Households also face a triple whammy from rising bills in April.

Electricity and gas bills for a typical household are set to rise by £693 a year in April, a 54% increase, after regulator Ofgem raised the price caps that energy companies are subject to at the start of the month. Global wholesale gas prices have quadrupled in the past 12 months, Ofgem said.

In addition, a rise in National Insurance tax for employees, employers and the self-employed will see them all pay 1.25p more in the pound. This means that a worker with £20,000 a year will pay an additional £89 in tax, while a worker with £50,000 will pay £464 more.

And municipal taxes are expected to rise in most parts of the country in April. Increases will vary by region, but the Institute of Fiscal Studies says a 5% increase, to keep pace with government funding shortfalls and post-pandemic stimulus spending, would see bills rise by £220 per year by 2024-2025.

Your Director of Mortgage Decisions Dominik Lipnicki said: “The upcoming hikes will lead to the biggest crisis in life for decades. That’s why I think overpayments for the rest of this year will return to more normal levels, or decrease slightly in 2022.

The increase in National Insurance will also affect employers, which could impact what they distribute in wage increases, which will further affect household budgets.

L&C Mortgages Associate Director of Communications, David Hollingworth, adds: “It may come as a surprise that borrowers have increased their mortgage overpayments as we enter a period of skyrocketing cost of living.

However, this is likely due to homeowners being able to save more through working from home and not being able to spend as much during lockdown times.

It appears that they are deploying these savings to reduce their liabilities, which should, in turn, help them weather a higher rate environment in the future.

The advantage of one-time overpayments also lies in the flexibility they offer consumers, paying too much when they can, but having the ability to opt out if monthly budget pressure requires it.

If the cost of living continues to rise, it could reduce the ability to withstand large overpayments, but these figures show that borrowers are well aware of what can happen and are taking positive steps to improve their situation.

The average rates for two, three, five and ten years have all been lifted, according to new data from Moneyfacts.

The average rate for a two- and three-year fixed rate rose 5 basis points each, to 2.55% and 2.61%, respectively. The average rate for a five-year fixed rate increased by 7 basis points, to 2.82%, while the average rate for a 10-year fixed rate increased slightly by 1 basis point to reach 2.79% .

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