Homeowners can save ‘thousands’ by using National Insurance cut to overpay mortgage | Personal Finance | Finance

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With many workers benefitting from a pay-packet boost this month as a result of the National Insurance cuts, putting this extra cash towards mortgage overpayments could save homeowners thousands over the life of their mortgage.

Mortgage overpayments refer to additional payments made by a borrower on top of their regular monthly mortgage repayment amount.

New calculations from Santander show that a worker earning £30,000 a year will see an extra £29 a month in their January 2024 payslip.

If they repurposed all £29 towards overpaying a 25-year mortgage of £200,000 at 4.7 percent they would save £7,405 in interest and be mortgage-free more than a year earlier than planned.

Even committing just part of a NI saving could make a difference. For example, Santander accepts overpayments from just £10 per month, which on the same mortgage would save more than £2,500 in interest and shave four months off a customer’s mortgage term.

Graham Sellar, head of business development, mortgages at Santander, commented: “Many people will shortly see the first benefits of the National Insurance cut in their pay packet.

“For those able to, using this extra money each month to overpay on their mortgage could reap huge benefits in the long run, saving thousands and helping them achieve the mortgage-free dream sooner than expected.”

According to Santander’s calculations, those earning between £60,000 and £100,000 a year will see an NI saving of £63 a month.

If this is put towards a £200,000 mortgage, it would save £15,093 in interest and take over two years off the term.

In 2023, Santander customers overpaid a total of £903million through the lender’s online and mobile channels, an increase of 78 percent on the previous year.

In the first week of 2024 alone, Santander reports 18,198 overpayments were made online, with customers making use of the reset 10 percent overpayment allowance.

This is where most mortgage lenders allow customers to repay 10 percent of their outstanding capital each year before any early repayment charges are incurred.

People can find out how much they may be able to save using Santander’s mortgage overpayment calculator.

The main rate of National Insurance Contributions (NICs) has been cut from 12 percent to 10 percent. The changes came into effect on January 6, 2024.

The main rate of NICs paid by the self-employed (‘Class 4 NICs’) has also been reduced from nine percent to eight percent. This rate cut will apply from April 6, 2024.

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The requirement of the self-employed to pay the flat rate NICs charge (‘Class 2 NICs’), which applies when someone’s annual profit exceeds a set threshold (the ‘lower profits threshold’) has also been cancelled. This threshold is currently £12,570, and the change will also take effect from April 6, 2024.

The changes are estimated to reduce tax receipts by £9.4billion in 2024/25, rising to £10.0billion by 2028/29.

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