Millions of property owners may be able to repay their mortgages up to four years before their term comes to an end, according to data released by Moneyfacts.
In March 2009, the Bank of England lowered the base rate to 0.5%, and mortgage deals appeared to be at their lowest. However, since that time, lenders have steadily lowered their rates to offer some of the cheapest deals ever. Increased competition between lenders is resulting in further deals becoming available to borrowers.
The average rate charged for a two year fixed rate deal in 2009 was 4.79%. Currently, the average fixed rate deal for two years is 2.56%, saving hundreds of pounds for homeowners. As the competition continues between lenders, experts have predicted that the cheapest fixed rate deal will soon fall to below 1%.
Although the savings made each month on mortgage payments could be used to fund a holiday or shopping, the money could also be used to pay extra against the mortgage. As the debt is reduced much quicker, the amount of interest paid also falls. You will also pay off the mortgage before the original term.
If borrowers have a fixed rate deal, it is generally possible to overpay up to 10% every month without generating an early repayment charge. Each lender will have their own rules. Mortgage advisers who have undertaken CeMAP training will be able to advise which deals work out to be the best value, as some may charge fees to remortgage.
