Mortgage Borrowers squander money saved on low interest rates

Written by admin on November 26th, 2010

Buying a Schnoodle

I was talking with some clients last night and they happened to mention how they had more money at the end of each month since the interest rate had dropped from 5% to ½ %.  As a money saving expert I wanted to know what they were doing with the extra money they were now saving on their normal mortgage payments. I asked if they were using the extra money to overpay their mortgage to reduce their mortgage balance down and they smiled and said, No. I asked if they were saving this extra money for a rainy day or reducing their credit card debts and they replied ‘No’ again. Finally they said that they were buying a Schnoodle dog which is a cross between a Schnauzer and a Poodle. This of baffled me!

Latest research

This morning I found some research by the unbiased website that suggested more than 56% of UK mortgage borrowers on tracker rate mortgages were not overpaying their mortgages despite interest rates being at their lowest rate ever. It seemed these borrowers were squandering the windfall they had received from the drop in their monthly mortgage payments since interest rates had plummeted.

It seemed that one in five borrowers researched had maintained their original mortgage repayments at the level they were before the Bank of England started dropping the interest rates. This research suggested that 38% of borrowers were using the extra money to pay off their other debts and 12% were letting their current accounts build up a reserve in other words they were saving the extra money from their windfall.

The most sobering part of this research is that borrowers with debts are using the money saved on their mortgage to reduce their credit card and personal debts

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