UK mortgage holders urged to make overpayment move as fixed rate dips below 5%

Brits have been told that they could save more than £4,000 on their mortgage with just £21 a month. The Bank of England's decision to cut the base interest rate from 4.25% to 4% has pushed the average fixed-rate mortgage below 5% for the first time since before Liz Truss's "mini budget" in September 2022. Now, Jinesh Vohra, CEO of mortgage overpayment app Sprive, is encouraging homeowners, especially those on variable rates and those able to secure new lower fixed-rate deals, to use the savings to overpay their property loan, and potentially save thousands in interest.

"Someone with a £150,000 mortgage at 4.25% over 25 years currently pays around £812 a month," he said. "The 0.25% cut brings this down to £791 - a saving of £21 a month, or £252 a year. If they keep paying £812 and put that £21 towards overpayments, they could save £4,280 in interest and clear their mortgage a year and a month sooner."

Mr Vohra added: "Overpaying is one of the most powerful ways to become mortgage-free faster.

"Even small, regular overpayments can knock years off your term and save thousands - all without stretching your budget.

The Bank of England's Governor, Andrew Bailey, described the interest rate decision as a "finely balanced decision", after Monetary Policy Committee (MPC) members were forced to hold a second vote after failing to reach a majority the first time.

Mr Bailey also stressed that the future path for rate cuts was clouded by uncertainty amid divisions among the committee and an array of conflicting economic data.

"I do think the path continues to be downwards," the Governor said.

"There is however genuine uncertainty about the course of that direction of rates.

"The path has become more uncertain because of what we are seeing."

He said there were both "upside" and "downside" risks to the UK's inflation level.

The average homeowner on a tracker mortgage will see nearly £29 shaved off their monthly payments, industry data showed after the decision.

However, savings rates are also linked to the interest rate and will be reduced in the coming weeks.

In the month to July 18, an estimated 2.1 million households missed at least one essential payment such as rent or mortgage payments, utility bills, credit card or loan payments.

An estimated 13.9million households (49%) also made at least one adjustment to cover essential spending such as utility bills, housing costs, groceries, school supplies and medicines in the last month - such as cutting back on essentials, dipping into savings, selling possessions or borrowing.