We’re often told that we could look to make big savings by overpaying on our mortgage, but new data from Santander Mortgages takes this one step further and shows the real impact customers could have on their home ownership status – all for the price of a pub lunch.
With interest rates remaining low, the data released today shows that a customer taking a £200,000 mortgage over a 25 year term could save £1,146 in interest and celebrate being mortgage free four months earlier with a humble £10 a month overpayment1.
Those customers who have a little extra each month could reap even larger benefits, with a £100 regular monthly overpayment saving £9,948 in interest and taking over three years off the life of a £200,000 mortgage2. Borrowers with a larger mortgage of £500,000 stand to make even bigger gains, with the same overpayment saving over £10,000 in interest and freeing the customer from their mortgage one year and five months earlier than planned3.
Miguel Sard, Head of Mortgages at Santander, commented: “Many customers don’t realise that they’re able to make such small overpayments on their mortgage – or the huge savings that those overpayments could bring with interest rates as they currently are.
“While it’s important that customers remember to keep cash savings aside for a rainy day, our data shows that even an extra £10 a month makes a difference over the life of a customer’s mortgage. This is great news and shows the value of mortgage overpayments doesn’t need to be reserved for people who receive large bonuses or have hundreds each month to spare.”
The data from Santander Mortgages shows that 97% people who currently overpay on their mortgage opt to use the extra payment to reduce the term of their mortgage4, but it could alternatively be used to reduce the monthly payment amount across the same term.
Santander Mortgages recently became the latest bank to make it easy for customers to make overpayments towards their mortgage through its online portal. Since the portal was set up in October 2018 over £8.31 million has been overpaid by Santander Mortgage customers. Customers can overpay any amount from £10 through the portal, however other banks will have varying minimum limits. It’s worth noting that many mortgage lenders cap fee-free overpayments to 10% of the outstanding capital on the mortgage so it’s important that customers know what they are able to do under their mortgages borrowing rules.
For those customers in the fortunate position to be able to overpay 10% they could save £46,608 in interest on a typical £200,000 mortgage, while a larger £500,000 mortgage would see a saving of an astounding £116,522. In both instances the mortgage would be repaid 14 years earlier than planned5.
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The information contained in our press releases is intended solely for journalists and should not be used by consumers to make financial decisions.
Notes to Editors
1) Based on regular overpayments of £10 a month on a £200,000, 25 year mortgages at 2.5%. This is for illustration only and doesn’t take into account fluctuating interest rates.
2) Based on regular overpayments of £100 a month on a £200,000, 25 year mortgages at 2.5%. This is for illustration only and doesn’t take into account fluctuating interest rates.
3) Based on regular overpayments of £100 a month on a £500,000, 25 year mortgages at 2.5%. This is for illustration only and doesn’t take into account fluctuating interest rates.
4) Based on the Santander customers who currently overpay on their mortgage.
5) Based on an annual overpayments of 10% of the outstanding capital balance on a £200,000 and £500,000, 25 year mortgages at 2.5%. This is for illustration only and doesn’t take into account fluctuating interest rates.
6) You can find out exactly how much you could save by using the Santander Mortgages overpayment calculator: https://www.santander.co.uk/info/mortgages/overpayment
Santander UK is a financial services provider in the UK that offers a wide range of personal and commercial financial products and services. It has brought real competition to the UK, through its innovative products for retail customers and relationship banking model for UK SMEs. At 30 June 2018, the bank has c24,200 employees. It serves around 15 million active customers, via a nationwide branch network, telephone, mobile and online banking; and 64 regional Corporate Business Centres. Santander UK is subject to the full supervision of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in the UK. Santander UK plc customers are protected by the Financial Services Compensation Scheme (FSCS) in the UK.
Banco Santander (SAN SM, STD US, BNC LN) is a leading retail and commercial bank, founded in 1857 and headquartered in Spain. It has a meaningful market share in 10 core markets in Europe and the Americas, and is the largest bank in the euro zone by market capitalization. At the end of June 2018, Banco Santander had EUR 981 billion in customer funds (deposits and mutual funds), 140 million customers, 13,500 branches and 200,000 employees. Banco Santander made attributable profit of EUR 3,752 million in the first half of 2018, an increase of 4% compared to the same period last year.
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