Broker, however, says overpayments rarely advised for borrowers
Just over one in six first-time buyers who purchased a property within the past five years intend to pay off their mortgage before reaching the age of 40, according to a TSB report, which also revealed that more than two-thirds of these buyers are making overpayments on their mortgages.
The survey of more than 1,000 recent first-time buyers found that nearly three in five hope to reduce the length of their mortgage term. Among those making overpayments, 43% do so on a monthly basis.
The data also showed that 20% of respondents typically overpay between £200 and £299 each time, while 17% contribute between £300 and £399. In addition, 9% make lump sum payments ranging from £1,000 to £2,499.
To accelerate mortgage repayment, many first-time buyers reported adjusting their financial habits. More than half said they are increasing savings (57%) and adopting stricter budgeting (55%). Nearly three in 10 are taking on additional employment or cutting back on holidays and discretionary spending. A smaller proportion (18%) are reducing pension contributions. Only 3% of those surveyed indicated they are not taking any action to shorten their mortgage term.
The research also highlighted that for almost seven in 10 respondents, repaying their mortgage is a higher priority than increasing their pension savings. In contrast, 25% place greater emphasis on their pension.
“Recent first-time buyers are prioritising overpayments over building up savings, pension contributions, and holidays, in the hope of becoming mortgage free earlier in life,” said Craig Calder, director of mortgages at TSB. “Overpaying can be a great way of shaving years off your mortgage, and we’d advise building this into your wider financial plan that ensures money confidence across savings, budgeting and a pension.”
For the 33% of first-time buyers not making overpayments, the most common reason was affordability, cited by 47%. Other factors included maintaining a financial buffer (28%), saving for family needs (22%), concerns about job security (19%), and prioritising current lifestyle spending (18%).
Rebecca Wilkins (pictured right), principal mortgage and protection adviser at Cutting Edge Mortgages, shared they do not usually advise clients to make overpayments on their mortgage. “When the mortgage is already interest only and the client is interested in trying to make that into repayment, sometimes it’s impossible to remortgage them onto a repayment, and that’s when overpaying becomes a godsend,” she said.
“Some who have investment properties like buy-to-lets, they are usually on interest only. For them to have a strategy to have that mortgage free, we talk about overpaying at that point because it just means that you’ve got the flexibility. If you have a rental void, then you don’t need to make that overpayment, you can sort of just make the interest only. It just makes that cashflow problem go away, so that’s when we tend to advise on the overpayments.”
Wilkins also commented on the challenge of making overpayments for borrowers. “They’re already committing a lot of money to the mortgage and so, saving interest that you can’t see is not something that they want to do,” she explained. “They prefer to just go out for a meal, rather than putting extra money towards it. They don’t see the benefit of it.”
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