Mortgage holders save rather than repay mortgage
A survey of 1022 UK mortgage holders found that 42% are saving regularly – double the proportion that regularly overpay on their mortgage (21%).
The online bank said one reason for this could be a widespread lack of awareness among mortgage holders on the current details of their loan.
Almost a third of those surveyed did not know the interest rate on their mortgage and 43% didn’t know the total cost of their mortgage including interest. A quarter did not know whether or not they were able to overpay on their mortgage.
When asked hypothetically how they would use any spare income, the most popular answer was overpaying their mortgage at 48% despite twice as many saving in reality.
The research found that by offsetting their savings against their mortgage debt, the average mortgage holder could reduce their mortgage payments by £28.25 per month while retaining access to their savings.
Richard Tolchard, senior mortgage manager at First Direct, said: “People continue to try to put some money to one side and mortgage holders are no different in also wanting to pay down their loan.
“However as this study shows, more often than not they choose to feed extra money into a savings account.
“This is where an offset mortgage can offer the best of both worlds, acting as a savings account and a way to reduce their net borrowing, as the customer keeps the flexibility to access their savings if they need them.”