Mortgage payers haven’t faced this much pressure since the 2008 financial crisis. After more than a decade of ultra-low interest rates, millions of homeowners are now paying 5–6% or more on their mortgages.
For many, that’s the difference between affordable monthly payments and a serious financial strain.
The good news? There are still ways to save.
Some strategies focus on lowering the interest you pay overall, while others can make your monthly payments more manageable.
Let’s go through them step by step.
1. Get off the standard variable rate
If your fixed or discounted deal has ended, chances are you’ve been moved onto your lender’s Standard Variable Rate (SVR). This is almost always the most expensive option.
- SVRs can be 1–3% higher than competitive fixed or tracker deals.
- On a £200,000 mortgage, that difference could cost you £200–£300 per month extra.
What to do:
- Don’t forget about a product transfer, staying with your current lender but switching to a new deal, which can save on fees.
- Start shopping around 3–6 months before your deal ends.
- Compare fixed and tracker rates across several lenders.
2. Overpay your mortgage (if you can)
Overpayments may sound counter-intuitive when you’re trying to cut costs, but they’re one of the most powerful ways to save long-term.
- Most lenders let you overpay up to 10% of the outstanding balance per year without penalty.
- Even small overpayments add up. For example, rounding £850 up to £900 per month could save £10,000+ in interest over the term and shorten the mortgage by years.
Tip: Always tell your lender the overpayment is to reduce the capital (loan balance), not just the interest.
3. Save for a lump-sum overpayment
If you can’t commit to regular overpayments, build a savings pot and make lump-sum payments instead.
- Use tax refunds, bonuses, overtime, or side-hustle income.
- Even a one-off overpayment of £5,000 on a £200,000 mortgage could save £8,000–£10,000 in interest over the term.
Again, specify it should reduce the capital, not just cover interest.
4. Extend your mortgage term (short-term relief)
Extending your term doesn’t reduce the total cost, in fact, you’ll pay more interest overall. But it does lower monthly payments, which can help in tough times.
- Example: Extending a £200,000 mortgage from 20 years to 30 years could cut monthly payments by £250–£300, though you’ll pay more interest across the life of the loan.
This option should be treated as a last resort if you’re struggling to keep up.
5. Improve your Loan-to-Value (LTV)
Lenders reward lower risk with better rates. If you can reduce your mortgage to a lower LTV band (e.g. 90% → 80% or 75%), you’ll unlock more competitive deals.
Ways to reduce your LTV:
- Make overpayments to build equity faster.
- Increase your deposit if you’re remortgaging.
- Improve property value with renovations (e.g. extensions, loft conversions).
6. Look into green mortgages and efficiency incentives
Some UK lenders now offer green mortgages with lower rates if your home has a strong Energy Performance Certificate (EPC) rating (A or B).
- If your property is less efficient, making upgrades like insulation, double glazing, or installing renewable energy systems could both cut your energy bills and qualify you for better mortgage deals.
Check with your lender as some offer cashback or discounted rates for energy-efficient homes.
Other smart moves to consider
- Use a mortgage broker: They have access to exclusive deals and can guide self-employed borrowers or those with complex incomes.
- Check fees carefully: Low rates sometimes come with high arrangement fees, wiping out savings.
- Watch out for early repayment charges: If you’re overpaying or switching deals, always confirm whether penalties apply.
Mortgage cost comparison (example: £200,000 over 25 years)
| Deal type | Interest rate | Monthly payment | Annual cost | 5-year cost (before fees) |
|---|---|---|---|---|
| Standard Variable Rate (SVR) | 6.49% | ~£1,350 | ~£16,200 | ~£81,000 |
| 2-year fixed deal | 4.25% | ~£1,080 | ~£12,960 | ~£64,800 |
| 5-year fixed deal | 4.50% | ~£1,110 | ~£13,320 | ~£66,600 |
| Tracker (BoE base rate +1%) | 3.99%* | ~£1,050 | ~£12,600 | ~£63,000 |
*Based on a Bank of England base rate of 2.99%. Tracker rates vary with future base rate changes.
Key takeaways
- Staying on an SVR can cost £250–£300 more per month than fixing.
- Over five years, switching to a fixed deal could save £14,000–£17,000 versus staying on SVR.
- Trackers may be cheaper short-term but carry risk if the base rate rises.
Case study: Switching vs. staying put
Sarah has a £200,000 mortgage. Her fixed deal expired, and she was moved onto her lender’s SVR at 6.49%, paying £1,350/month.
- By switching to a 5-year fix at 4.5%, her monthly payment falls to £1,100, saving £250/month.
- Over the 5-year fixed term, that’s a saving of £15,000, even after accounting for £999 in fees.
Final thoughts
Saving money on your mortgage takes effort, but it’s possible. Whether you switch to a better deal, overpay, reduce your LTV, or explore green mortgage incentives, small changes can add up to thousands saved over the lifetime of your loan.
The key is to stay proactive. Don’t wait until you’re stuck on your lender’s SVR. Plan ahead, use brokers where needed, and review your mortgage regularly.
Mortgage saving FAQs
When should I start looking for a new mortgage deal?
Start 3–6 months before your current deal ends. This gives time to compare options and avoid being moved to your lender’s SVR, which is usually much higher.
How much can I overpay on my mortgage without penalty?
Most lenders allow overpayments of up to 10% of the outstanding balance per year during a fixed term. Check your mortgage offer or ask your lender to confirm.
Is it better to overpay regularly or save for a lump sum?
Both save money. Regular overpayments chip away at interest steadily, while lump sums make a bigger dent all at once. The best approach depends on your cash flow, a mix of both can work well.
What is Loan-to-Value (LTV), and why does it matter?
LTV is the ratio of your mortgage to your home’s value. A lower LTV means lower risk to the lender, unlocking better rates. For example, dropping from 90% LTV to 80% could save you 0.5–1% on your rate.
What happens if I can’t make my mortgage payments?
Contact your lender immediately, they’re required to work with you to find solutions, such as temporary payment plans. You can also seek free help from charities like StepChange or National Debtline before things get critical.
