Homeowners urged not to look to the BoE for guidance

David Kuo, Head of Personal Finance at Fool.co.uk, says, “We are not surprised that the Bank of England has again decided to leave interest rates unchanged given the uncertainty in the UK economy.

“However, consumers should note that while the Bank of England has adopted and wait-and-see approach, we should not be tempted into playing the same waiting game because lenders aren’t.

“A recently study has found that there are now 40% fewer mortgage products available compared to July. The reduction in mortgage products has not only affected the sub-prime market but the prime borrowers too.

“Given the uncertainty in the UK economy, Fool.co.uk urges consumers to redress the balance by injecting certainty into their personal finances. Homeowners should demonstrate a readiness to overpay their mortgage, especially if they are nearing the end of fixed-rate deals. By showing a willingness to boost the equity in our homes, we put ourselves in a better position to access better-value products.

“Most lenders will let you overpay your mortgage by 10% without incurring penalties. Overpaying a mortgage by a tenth will not only increase the equity in your home but it will also reduce the length of your loan.

“For example, overpaying a 25-year £100,000 mortgage at 6% by £64 a month will cut the length of the mortgage by over four years. It will also slash your interest bill by almost £20,000.

“Consumers should not look to the Bank of England for guidance because lenders are marching to the beat of a different drummer. High street banks are adopting a cautious approach, and it’s worth bearing in mind that he who pays the piper calls the tune.”