New capital repayments mortgage scheme

With the Bank of England base rate continuing to remain at an historic low, The Co-operative Bank and Britannia are now offering customers the opportunity to make additional capital repayments on their mortgage, of up to 50% without penalty.

This follows the latest internal data from The Co-operative Bank, which shows that since 2008 there has been an increase in the number of customers making mortgage overpayments of almost a third (28%) and an increase of 23% in the amount made in mortgage overpayments.

The new capital repayments scheme follow on from a successful initial pilot twelve months ago, and this time it will be made available to both The Co-operative Bank and Britannia customers throughout the year. It is expected to be of particular interest to those who have already made significant overpayments.

The new scheme will sit outside the normal overpayment scheme, and will offer a permanent reduction in the capital outstanding, immediately reducing the outstanding balance of the mortgage.

Currently the majority of customers within their initial mortgage deal period at The Co-operative Bank and Britannia are allowed to make overpayments of up to 10% of their mortgage balance per year, without any penalties, and customers on lifetime trackers and standard variable rates have no restrictions on overpayments.

James Hillon, Head of Mortgages at The Co-operative Bank, comments, "With interest rates continuing to remain at their historic low level, our data shows that customers are increasingly looking to take the opportunity to pay off more of their mortgages.  As a responsible lender we are keen to offer customers the opportunity and flexibility to take advantage of the low interest rate environment, by again offering customers the chance to make additional repayments without penalty, in the form of capital repayments."

Customers who make additional payments on their mortgages are able to realise a number of benefits, including the ability to obtain lower rate products available for lower loan to value mortgages, as well as reductions in monthly payments and/or the term of the mortgage.

Additionally, new research by The Co-operative Bank shows that the most common reason for people to make overpayments is to repay their mortgage more quickly, with four in five overpayers choosing this option (80%).  However a third of overpayers (35%) believe that this is a better option for them as the interest on their savings is low, and a quarter (25%) feel that they need to take advantage of current low rates as interest rates may rise in the near future.