Homeowners may be able to make savings of more than £7,400 and become “mortgage free” thanks to a recent tax cut, according to Santander.
Earlier this month, the Government slashed the National Insurance rate from 12 to 10 per cent with a worker on £30,000 a year set to save £29 a month.
According to the bank, if someone put this amount into overpaying a 25-year mortgage of £200,000 at 4.7 per cent they would save £7,405 in interest.
Furthermore, homeowners would reduce their mortgage term by more than a year by taking advantage of this tax cut.
Do you have a money story you’d like to share? Get in touch by emailing money@gbnews.uk.
Santander is sharing how people can become 'mortgage-free' quicker
GETTY
Santander customers overpaid more than £903million on their mortgages online or by mobile last year, which is up 7.8 per cent in 2022, according to the lender.
Those looking to commit part of their National Insurance saving could still make a difference with the bank allowing customers to make overpayments from as little as £10 a month. Limits on mortgage overpayments may apply.
On the same 25-year mortgage deal, this would lead to a homeowner saving over £2,500 in interest and slash the term by four months.
Someone earning between £60,000 and £100,000 annually is set to benefit from a National Insurance saving worth £63 a month.
If this was put towards overpaying a £200,000 mortgage, they would save £15,093 in interest and two years would be taken off the term.
Graham Sellar, the head of business development for mortgages at Santander, urged people to take advantage of “benefits in their pay-packet”.
He said: “For those able to, using this extra money each month to overpay on their mortgage could reap huge benefits in the long run, saving thousands and helping them achieve the mortgage free dream sooner than expected.”
Here is a breakdown of the interest saved from making regular mortgage overpayments following the National Insurance cut, according to the bank:
Regular monthly overpayment: £10 / Interest saved over mortgage: £2,652 / Time taken off mortgage term: Four months
Regular monthly overpayment: £12 / Interest saved over mortgage: £3,169 / Time taken off mortgage term: Five months
Regular monthly overpayment: £29 / Interest saved over mortgage: £7,405 / Time taken off mortgage term: One year, one month
Regular monthly overpayment: £45 / Interest saved over mortgage: £11,145 / Time taken off mortgage term: One year, eight months
Regular monthly overpayment: £62 /Interest saved over mortgage: £14,881 / Time taken off mortgage term: Two years, three months.
LATEST DEVELOPMENTS:
Interest rate hikes have pushed up mortgage repayments for many
GETTYEarlier this week, the Bank of England confirmed it would hold interest rates at the current level of 5.25 per cent.
Economists are confident the central bank will slash the base rate in the later half of the year which could see affordable deals for those coming to an end of their fixed rate.
According to the latest figures from Moneyfacts, the average two-year fixed residential mortgage rate today is 5.59 per cent, a slight rise from yesterday.
Comparatively, the average five-year fixed residential mortgage rate is 5.23 per cent, a jump from 5.18 per cent over the same period.