Borrowers urged to pay mortgage at higher rates

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by Kay Murchie

Mortgage broker John Charcol is urging borrowers to pay higher mortgage repayments - as much as their budget will allow.

Katie Tucker of the mortgage broker said last year, borrowers struggled to keep to a tighter budget and now interest rates are falling, by keeping their mortgage payments up at the level they are now used to, they could be rewarded with an early finish to their mortgage.

Ms Tucker added that a mortgage dictates when you can retire. By paying it off just a few years early can make a big difference to your quality of life not only because of age, but because of the money you free up to spend on other things.

In addition, with further expected during 2008, borrowers should continue to pay at the higher rate, recommends Ms Tucker.

Borrowers on variable rates would have seen their monthly mortgage repayments increase 5 times in the last 2 years. Interest rates rose from 4.5% to 5.75%, meaning the average monthly payment for a variable £100,000 repayment mortgage went from £555 to £629, added Ms Tucker.

Those that have been able to manage these repayments should think about keeping them at that level because whatever isn’t paying interest will pay off the capital instead, reducing the term of your mortgage, concluded Ms Tucker.

The Bank of England cut interest rates from 5.5% to 5.25% last week, after a similar quarter percent in December.

Many property experts are anticipating that interest rates could fall to 4.5% by the end of this year.