NatWest has made changes to allow new and existing mortgage customers to make an overpayment of up to 20% without incurring an early repayment charge (ERC).
The overpayment allowance, which has increased from 10%, will renew annually on the anniversary of the product draw down.
This increase will apply to customers on fixed or tracker rate products.
Commenting on the change, Riverside Mortgages owner and mortgage broker Lewis Shaw describes the change as “odd”.
Shaw says: “I can only assume it’s something to do with implementing consumer duty by giving greater flexibility to borrowers who wish to pay off their mortgages faster without penalty. It’s a positive change if a borrower has the wherewithal to make that level of overpayment.”
“However, it won’t make any difference for most borrowers as people are struggling to make ends meet due to the cost of living crisis, so mortgage overpayments at 20% of the outstanding balance probably aren’t high on their priority lists.”
Release Freedom broker and director Simon Bridgland comments: “This is a great and useful feature if a client needs it. It will be a bit of a headline grabber for NatWest without having to lower their rates, so I’m sure they will gain and retain more business as a result of it.”
“The best part is for existing mortgage account holders, many of whom will be self-employed, who perhaps would like to utilise the feature at some point in the future. Will more lenders follow suit?” HSBC has a similar 25% feature on some new products, but for a lender to offer it to existing clients is new to me.”
PAB Wealth Management director Luke Thompson explains that it’s “good news”, especially for those who have smaller mortgage amounts outstanding.
“It can be very easy for someone who has a £50,000 mortgage balance to reach their annual limit of overpayments so to have the ability to double the amount payable can only help consumers. If customers are in a position to overpay, by increasing their limit to 20% of the balance NatWest are giving people the opportunity to save thousands of pounds in interest over the life of the mortgage.”
“Hopefully this change from one of the UK’s biggest lenders will push their competitors into looking at their overpayment policies, which would only be a good thing for consumers in the long term.”
