Lloyds launches mortgage overpayment scheme

Lloyds Banking Group is inviting its standard variable rate (SRV) mortgage customers to increase their monthly repayments.

Under a new scheme that will run for a year, borrowers can overpay by up to 20% without incurring a financial penalty.

Research by the bank, which is the UK’s biggest mortgage lender, suggests over 63% of mortgage customers would definitely consider overpaying, or increasing their existing overpayment, if penalties are removed.

The group’s commercial director of mortgages, Stephen Noakes, says: “With mortgage rates at an historic low, there has never been a better time for the majority of people to overpay their mortgage.”

According to Mr Noakes, the typical mortgage repayment has fallen by around £188 per month since rates plummeted, while those on tracker mortgages are over £400 a month better off.

While the scheme is likely to prove popular with customers, Lloyds may also be very interested in gathering in as much mortgage debt as possible.

The 41% state-owned group wrote down £24 billion on bad loans in 2009, forcing it into an operating loss of £6.3 billion for the year.

In addition, credit rating agency, Moody’s, has recently pointed out that from the start of next year, the UK’s embattled banks have to begin repaying a collective debt of £319 billion, borrowed from the Treasury during 2007 and 2008.

The sum amounts to one-quarter of the UK’s entire £1.3 trillion residential mortgage book and Moody’s is expecting banks to limit their lending from the beginning of 2011.

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