UK homeowners are increasingly choosing to overpay their mortgages in a bid to shorten loan terms and shield themselves from future interest rate volatility, according to the latest Barclays Property Insights data.
The trend comes as spending on rent and mortgages rose 5.2% year-on-year in April, down slightly from 5.4% in March, reflecting a softening in mortgage costs amid wider expectations of a forthcoming Base Rate cut.
One in four mortgage holders are now making overpayments, with an average monthly additional contribution of £221. This equates to £2,647 annually, with borrowers estimating these payments will reduce their mortgage terms by an average of four years. The move is seen by many as a prudent strategy to offset the potential impact of rate increases when fixed-term deals expire.
Confidence in household finances held steady at 70% month-on-month, suggesting cautious optimism among consumers. Meanwhile, sentiment around the housing market itself remained unchanged from March at 29%, with many awaiting the Bank of England’s monetary policy decision, due on 8 May. A reduction in the Base Rate is widely anticipated and could provide further downward pressure on mortgage rates.
Despite interest rates continuing to weigh on consumer confidence, concerns have eased marginally. In April, 61% of consumers cited interest rates as a worry, compared to 63% the previous month.
Jatin Patel, head of mortgages, savings and insurance at Barclays, said the data pointed to steady demand for mortgage products, with particular cause for encouragement among younger would-be buyers. “Mortgage demand remains resilient, with encouraging signs that young renters feel more confident about entering the property market, despite high interest rates and an uncertain economic landscape,” he said.
He added that while overpayments could be an effective way to reduce the burden of borrowing, they should be considered carefully alongside other financial priorities, and in light of any early repayment charges.
SECOND HOME CHARGES
Elsewhere, new rules on council tax for second homes are beginning to bite. From April, local authorities have been granted powers to levy premiums of up to 100% on second properties. This change has particularly affected the 7% of homeowners who own an additional home, with average annual bills forecast to rise by £840.10. Nearly 35% of this group say they are considering selling their second properties as a result.
Council tax was cited as the most significant driver of increased housing costs by 30% of those who reported a rise over the past 12 months.
In the rental sector, confidence appears to be edging up. The proportion of renters who believe they could own a home within five years rose to 20% in April, from 15% the month before. At the same time, the number of renters saving for a deposit increased to 27%, compared to 22% in March, coinciding with a dip in mortgage rates offered by several mainstream lenders.
Barriers to home ownership also appear to be receding slightly. Just 18% of renters now view obtaining a mortgage as the main obstacle to buying a home, down from 21% in March.
Will Hobbs, managing director at Barclays Private Bank and Wealth Management, noted that household incomes have continued to grow faster than inflation, supporting consumer spending despite broader uncertainties. “The UK economy’s cyclical pulse has been strengthening a little in the last few months,” he said.
“The uncertainty created by the US tariffs will certainly have some dampening effect. However, there are potential offsets in the form of lower energy prices and the dramatic changes happening in Europe.”
He added that the latest data on inflation could give the Bank of England more flexibility ahead of its rate decision.
