Brits spend cash rather than pay off mortgage

This is revealed in the inaugural MortgageMood survey from Legal & General’s Mortgage Club. Of those surveyed, nearly half (41%) claimed to be spending money left over at the end of each month. Less than a third - 28% - were using remaining funds to contribute to further mortgage repayments.

For those on tracker mortgages, they are seeing the benefit of ongoing low interest rates as they have the largest proportion of cash left over at the end of each month, after bills and utilities. Around 27% of British mortgage payers have £100-£250 ‘spare cash’ at the end of each month as a result of low interest rates, while 15% have £250-£500 left over and 2% have more than £500 left over as a result of low interest rates. A third (33%) have less than £100 spare as a result of low rates.

Single people paying a mortgage are worse off than couples – no singles had more than £250 of spare cash, with 47% having £100-£250 spare and 53% having less than £100. By contrast, 25% of couples (married/co-habiting) had £100-£250 and 18% had £251-£500 spare.

When it comes to putting the spare cash to good use, only 28% are using it to overpay their mortgages. Around 41% are spending it on essentials, 9% are saving it and 9% are spending the money on luxuries. Those in the South East/East Anglia are most committed to reducing their mortgage payments – 43% are paying off their mortgages with spare cash from low interest rates – compared to just 13% in Scotland. Londoners are the biggest splurgers – 28% of them are using spare mortgage cash to buy luxury items.

Ben Thompson, managing director of the Legal & General Mortgage Club said: “This is the first MortgageMood survey we’ve done and the results are revealing. Clearly, mortgage payers on variable rates who have stayed in employment have benefited from the lower rates – and as a result they have some ‘spare’ cash.

“That needs to be balanced with the hard time so many British families are facing right now with inflation pushing up the price of basic commodities, austerity measures kicking in and a double-dip recession potentially looming.

“The fact remains that there is probably no better thing to do with any spare cash right now than reduce debts – including your mortgage – so we’d urge consumers who do fall into the category of having a few hundred pounds left over as a result of continuing low base rates and who don’t require the cash for life necessities to consider overpaying their mortgages.”