Millions of Homeowners Overpaying On Their Mortgage

Written by Sam Jones on 17 December 2012.

The current Bank of England's base rate remains at the lowest in its history and has remained at 0.5% for nearly 3 years. It was reduced to the current interest rate in March 2009. It is clear that UK borrowers are building a greater equity stake in their properties and this will serve to reduce the impact of any rate increases when they arrive at some point inevitably in the future. 

The fact that customers are paying off their mortgages also increases the available options when re-mortgaging, given the ability of consumers to benefit from the lower interest rates being offered to those with the greatest levels of equity.

Recent research by e.serv, the valuers has confirmed that mortgage lenders do favour affluent borrowers with equity as opposed to first-time buyers. This can be confirmed by the fact that there were 53,259 mortgages completed in November but only 22% were approved for high loan-to-value first-time buyers. Richard Sexton, a director at e.surv, said: "The slight improvement in overall lending glosses over the on-going struggles of first-time buyers. High LTV lending is a third lower than it was this time last year, which suggests things remain challenging for new buyers. Mindful of their risk profile and capital adequacy requirements, lenders appear to be focusing increased lending on relatively wealthy borrowers."

If the trend continues for those overpaying on mortgages continues next year, the CML have predicted that the volume of outright homeowners in the UK could outstrip the actual level of mortgage borrowers and this could occur as early as 2014. This may then give greater impetus to lenders to increase the range of options for those with less equity and higher loans to value.

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