Mortgage overpayments – small steps, big savings
| A third of homeowners are currently making overpayments on their mortgage | 40% of homeowners don’t have the confidence to overpay their mortgage | Most lenders allow you to make overpayments of up to 10% of your mortgage balance each year without incurring any penalties |
Homeowners across the UK could collectively shave £2.3bn off their annual mortgage interest bills simply by making overpayments, but many are hesitant to get started.
Recent research1 shows that, while overpayments worth a combined £5.3bn could potentially be made each year, 40% of homeowners admit they don’t feel confident enough to take that first step. Currently, only one in three mortgage holders is making overpayments.
Making overpayments work for you
Most mortgage lenders allow overpayments of up to 10% of your outstanding balance each year without applying any charges. Overpaying not only reduces the total interest you’ll pay overtime but also shortens the length of your mortgage.
Whether it’s a lump sum or a modest monthly amount, even small overpayments can have a meaningful impact. For example, if a homeowner with a £195,000 mortgage (term unspecified) contributes just £50 extra per month, they could save nearly £7,000 in interest and cut their mortgage term by one year and 10 months, according to the research.
Understanding the long-term benefits
Many homeowners are missing out on these potential savings, with a third of non-over payers citing ‘friction or lack of understanding’ as the reason for holding back. This is particularly relevant given the trend toward longer mortgage terms, some stretching up to 40 years.
With 69% of first-time buyers expressing a desire to reduce their interest, debt, or mortgage term, overpayments could be a practical strategy to consider. However, it’s essential to weigh this decision against your broader financial priorities. We’re here to help you assess whether overpaying your mortgage could be a smart move for your situation.
1Monzo, 2025
It is important to take professional advice before making any decision relating to your personal finances. Information within this article is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored advice and is for guidance only. Some rules may vary in different parts of the UK.