First Direct mortgage reports borrowers ignore mortgage overpayment.

According to First Direct mortgage research, twice the number of mortgage holders in the UK are using excess funds to add to their savings as opposed to paying down their mortgage. 

Despite figures showing that in the present financial climate, it is more rewarding to pay down a mortgage than save, the First Direct mortgage survey shows that 42 per cent of holders prefer to save regularly compared to 21 per cent who prefer to use extra money to overpay their mortgage.

First Direct's Richard Tolchard commented advising that people want to put money aside and this is no different for mortgage holders, and while it makes more sense to pay to extra money into their mortgage most are instead choosing to put any extra cash into a savings account.

Many borrowers when questioned on this point, offered the explanation that they are reluctant to reduce their mortgage debt when times are uncertain as they could need to have access to the extra money if their personal circumstances change.

However, when asked theoretically how they would plan to use spare cash, in general the most common answer was in reducing their mortgage. It would appear borrowers understand the logic behind making a mortgage overpayment however, they seem to find it difficult to actually commit to such action.

First Direct believes it is a lack of awareness of the details of their loan that leads borrowers into choosing to add to their savings rather than reducing mortgage debt. The First Direct mortgage survey of 1022 UK mortgage holders showed that almost a third did not know the interest rate on their mortgage. 

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