Banks advise customers to overpay on their mortgages

January 25, 2009 by Brendan

News

Lloyds TSB and HSBC have both advised customers to overpay on their mortgages wherever possible. This advice follows the drop in interest rates that has seen mortgage customers on standard variable rates (SVR) and tracker mortgages benefit from a substantial drop on their mortgage payments.

The SVR of Lloyds TSB has dropped by over 50% to 3.5% from what it was last summer, and the lender has admitted to 27,000 enquiries from customers to overpay on their mortgages in the last 3 months. HSBC is currently writing letters to 30,000 of their mortgage customers highlighting the benefits of overpaying on their mortgages.

The marketing director of C&G, Stephen Noakes, stated:

Homeowners with a tracker mortgage are hundreds of pounds a month better off. For those who can spare the extra money, making overpayments is a smart move.

Not only can it trim years off your mortgage term, but with house prices falling, overpayments will help to protect the equity in your home.

As well as advise that its customers overpay on their mortgages, HSBC has gone further by stating that customers who take advantage of the drop in interest rates to pay less on their mortgages could be heading for trouble in the not too distant future.

The head of mortgages for HSBC, Martijn van der Heijden, stated:

There is a genuine danger for homeowners in allowing their lifestyles to become accustomed to the current low rates.

Interest rates will increase at some point and it will feel painful for those borrowers who have soaked up the benefit of lower mortgage payments by extending their spending habits.