Rate cut can help reduce mortgage term

Mortgage borrowers can use today's (February 7th) cut to the base rate of interest to reduce the term on their mortgages.

That is according to Moneyfacts, which said that the savings made as a result of the reduction should be reinvested into mortgage payments.

This means the mortgage will be paid off sooner, with obvious benefits for borrowers.

Tracker-rate mortgage borrowers are the biggest beneficiaries of base rate cuts but Julia Harris from Moneyfacts said that people must check with their lender before increasing payments.

"These savings will only be possible if your mortgage lender allows you to overpay. According to Moneyfacts 84 per cent of mortgages available today allow overpayments," she commented.

"Just as the possibility of overpaying when rates are dropping is important so is the ability to underpay or take payment holidays when things get tough. 42 per cent of mortgages are fully flexible in this way," added Ms Harris.

The base rate of interest was cut today by 0.25 percentage points, taking it down to 5.25 per cent.

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