Growing numbers of first-time buyers are making extra payments on their mortgages in a bid to become mortgage-free faster, according to new research from TSB.
More than two-thirds (67%) of buyers who have purchased their first home in the past five years said they’ve made mortgage overpayments, with many aiming to clear their debt decades ahead of schedule.
Around one in six first-time buyers surveyed said they wanted to be mortgage-free by the time they reach the age of 40, with 68% prioritising becoming mortgage-free over boosting their pension pots). Nearly a third (29%) are prepared to forgo holidays and other lifestyle spending to help them achieve their goal of owning their home outright.
How much are people overpaying?
Nearly half (43%) of those who’ve made overpayments make them monthly, with one in five making overpayments of £200-£299 each time. One in six pay £300-£399, while around one in 10 make lump sum overpayments between £1,000 and £2,499 to pay off their mortgage more quickly.
Craig Calder, Director of Mortgages, TSB, said: “Overpaying can be a great way of shaving years off your mortgage, and we’d advise building this into your wider financial plan that ensures money confidence across savings, budgeting and a pension.”
If you’re not sure how much of a difference overpayments could make to you, L&C’s overpayment calculator can show you how much you can save – either in interest or the time it will take you pay off your mortgage. If you’re planning to overpay, make sure you check your lender’s terms before doing so, as some mortgages restrict overpayments to a percentage of the balance each year without penalty.
Only a third (33%) of first-time buyers don’t make overpayments, TSB said, with most citing affordability as the biggest barrier. Others choose to focus on building a savings buffer, or to saving towards having a family.
Falling age of first-time buyers
The average age of a first-time buyer has reduced from 32 to 31 over the past year, according to TSB’s report. The average mortgage term for first-time buyers has also fallen, from 32 years to 31 years.
Unsurprisingly first-time buyers in London, where property prices are highest, face the longest wait to get onto the property ladder. The average age of a first-time buyer in the capital is 33, which is hardly surprising given that the average value of a deposit in London is £134,000. This compares to an average deposit of £17,000 in the North East and £24,000 in Wales.
