Lloyds Banking Group Allows Higher Mortgage Overpayments

Lloyds Banking Group has launched a new scheme that allows customers with a variable rate mortgage to make increased mortgage overpayments without any financial penalty.

This new mortgage scheme from Lloyds will only last for a year, until the end March 2011 and aims to help customers get maximum benefit from the current low interest rates.

Under the scheme, customers with a variable rate mortgage will be able to overpay their mortgages by up to 20% with no financial penalty.

With the current low mortgage interest rates it means that mortgage affordability has improved. Mortgage payments (capital and interest) accounted for just over 30% of average earnings in Q4 2009, whereas they accounted for nearly half in Q4 2007.

Stephen Noakes, commercial director of mortgages at Lloyds Banking Group said; “With mortgage rates at an historic low, there has never been a better time for the majority of people to overpay their mortgage. The average mortgage repayment has dropped by around £188 per month. And those on tracker mortgages have done even better – on average they are just over £400 a month better off. Customers have a choice to make to gain maximum advantage from the extra cash in their pocket.”

On a £100,000 mortgage with an SVR of 3.5%, overpaying by just £50 per month will reduce the term of a mortgage by three years and six months, as well as save a customer £14,576.04 (£7,557.24 in interest and £7,018.80 in mortgage payments).