On Monday, the government announced a VAT rate cut in its pre-budget report, which according to some experts may help to boost the mortgage market.

According to personal finance website fool.co.uk, this rate cut of 2.5 percent should save a family on average around £42 per week.

If this saving is used wisely, it could seriously help a family with their mortgage repayments.  For example, the head of personal finance at fool.co.uk estimated that overpaying just one week’s worth of this money each month, i.e. £42, would save two years and £22,000 in interest over 25 years on a £180,000 mortgage at 7.5 percent.

According to the Chartered Institute of Taxation, this VAT cut to 15 percent will save a person earning less than £20,000 each year approximately £2.50 per week.  Even a small overpayment can have a significant effect on a mortgage over a few years.

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