Mortgage overpayments still common

Many Brits are still willing to make overpayments on their mortgages, despite a soaring cost of living, according to new research.

Abbey – which is the UK's largest provider of new mortgages – finds more than one in ten mortgage holders are planning to make an overpayment on their mortgage over the next six months.

This comes despite the consumer price index (CPI) – the government measure of inflation – hitting 4.4 per cent earlier this month, driven by large increases in the cost of fuel and food.

The government CPI target is just two per cent, with real incomes now dropping as wage growth falls behind inflation.

However, the Abbey research suggests paying off the mortgage remains a top financial priority for people and despite a tough economic environment.

Only a very small number of people are taking a payment holiday (three per cent) and even fewer are planning to free up extra cash and make an underpayment (one per cent).

The Abbey study also found that one in ten mortgage holders will be looking to change their payment plan over the next six months.

However, research from Standard and Poor's reveals mortgage arrears continue to rise, particularly among subprime borrowers.

Northern Rock and Bank of Scotland are two lenders singled out by Standard and Poor's study as experiencing a growing number of borrowers in arrears.

"A large proportion of mortgages offer borrowers flexibility and the research shows that many people are planning to take advantage of these benefits," explained Phil Cliff, director of Abbey Mortgages.

"It's great to see that people are quite rightly prioritising their mortgage payments ahead of other financial commitments - having a smaller mortgage can mean you get a better deal when you remortgage and of course reduces future monthly outgoings."

Chris O'Toole