More than one in ten homeowners will make use of low interest rates to pay off their mortgage in the next decade.
According to First Direct, some 24% of
mortgage holders are currently on course to pay off their mortgage within 10 years and this could rise to 35% thanks to the current environment.
Interestingly, women are more ambitious about bringing forward freedom day than men, aiming to shave off 3.3 years from their mortgage compared to 2.6 year for men.
Key to financial freedom
As a result of this increased focus on clearing mortgage debt, the average time between a first house purchase and outright ownership has fallen from 32 years a decade ago to 30 years today.
The First Direct research also reveals that becoming an outright homeowner represents freedom to many.
More than half (58%) rank paying off their mortgage as the most effective route to freedom, beating retiring from work (42%), foreign travel (46%), or children leaving home (13%).
Remortgaging? Avoid tracker
If your current mortgage rate is about to expire, then you should be wary of choosing a
tracker deal. With the base rate already at a low of 0.5%, there's little scope for further savings.
Worse, most analysts believe the base rate will rise sharply towards the end of the year, taking your mortgage repayments along with it.
By contrast,
fixed rate mortgages look an attractive option. Not only are the rates at near historic lows, but you'll be protected from any future rate hikes as well.
If you have a sizeable savings pot, then you may also want to consider an offset mortgage (whereby you sacrifice interest on your savings to reduce the interest on your mortgage). These deals will certainly offer good value in the short term, with current savings rates so uncompetitive.
However, savings rates will rise at some point in the future, and an offset mortgage will suddenly become less popular, so think carefully before you choose.
