Lloyds Banking Group shares fall on FTSE 100 as bank encourages mortgage overpayments

Under the new scheme the bank’s customers on variable rate mortgages will be able to overpay their mortgages by up to 20 per cent without receiving a penalty.

The Bank of England has said that its policy of keeping interest rates at 0.5 per cent has saved homeowners around £20 billion in interest payments over the last 12 months.

Many homeowners have been using the low rates as an opportunity to pay off more of their mortgages than they otherwise would. Studies have also indicated a decline in the proportion of wages being used to pay mortgages falling from around half to less than a third in a period of two years thanks to low interest rates.

Lloyds currently allows 10 per cent overpayment of mortgages per year. The latest scheme allowing up to 20 per cent will run for the next year.

Stephen Noakes, commercial director of mortgages at Lloyds Banking Group, said, “With mortgage rates at an historic low, there has never been a better time for the majority of people to overpay their mortgage. The average mortgage repayment has dropped by around £188 per month. And those on tracker mortgages have done even better – on average they are just over £400 a month better off. Customers have a choice to make to gain maximum advantage from the extra cash in their pocket.”

By 10:15 shares in Lloyds Banking Group were down 1.93 per cent to 57.34 pence per share.