7% of Homeowners Overpaid Their Mortgage This Year

Most mortgages allow homeowners to pay over and above their monthly bills. But few borrowers are taking advantage of this perk, even though doing so can save you thousands over the term of your mortgage and let you own your home outright sooner.

New research from life insurance broker LifeSearch has revealed that just 7% of UK borrowers overpaid their mortgage over the last six months. Those who did overpay put an average of £319 extra toward their home loan every month.

Cumulatively, homeowners have overpaid £7 billion on their mortgages since January, or £1.5 billion per month. 

LifeSearch suggests that for these homeowners, the frugal habits of lockdown have stuck. Instead of splurging in our reopened society, some are opting to pay down their debts. 

14% of Brits report that they’ve put money toward credit cards, loans, mortgages or other forms of debt over the last six months. Over 55s have directed the most cash toward their debts—an average of £469 per month.

Overpaying mortgages is most popular among young homeowners, with 12% of borrowers aged 25-39 making overpayments this year. These millennial homeowners have the longest mortgage terms ahead of them and are eager to pay off the loans more quickly and avoid years of additional interest.

Emma Walker, chief marketing officer at LifeSearch, said: “When you consider that an overpayment of just £200 a month could take more than seven years and over £12k off the average 25 year mortgage, so it makes sense that many—particularly among Generation Y—are choosing to overpay.”

Over 55s were the least likely to direct some of their hoarded cash to mortgage overpayments. Just 3% did so this year, perhaps because most are near the end of their mortgage term, with comparatively less balance left to accrue interest. But when they did make overpayments, they devoted the most: an average of £421 per month.

Others are continuing the savings bonanza that saw Britons stash £190 billion during the coronavirus lockdowns. LifeSearch’s survey found that 39% have continued to save during the last six months, even as the temptations of (masked) meals out and holidays (to up the road) beckoned. The broker pinpoints our collective savings at £5.8 billion each month.