It can be beneficial for people to overpay their mortgage, new research has suggested.
According to a study carried out by First Direct, UK homeowners who pay an additional £300 a month on their home loan, rather than saving it separately, could find the practice leaves them £41,665 better off over the term of a typical 25-year arrangement.
These findings are based on taking out a £100,000 mortgage, coupled with current rates for loans and savings .
It was demonstrated that those who pay back more than they need to could end up settling their arrears 12 years early.
Richard Tolchard, senior mortgage product manager at the organisation – which is a division of HSBC Bank – said borrowers can be better off “paying down their debt ahead of saving as historically the average rate of interest paid on a mortgage has been consistently higher than the average amount earned by saving”.
He observed, however, that people should not be deterred from placing some cash aside, as it is advisable to have spare money to use on a rainy day.
