How Much Could a Lower Mortgage Rate Save?
This guide is for general information only and does not provide financial advice. Check your lender’s terms before overpaying, as early repayment charges may apply. Your home may be repossessed if you do not keep up repayments on your mortgage.
A lower rate reduces the interest charged on the same balance, which can lower your monthly payment or, if you keep paying the same amount and your mortgage allows it, shorten the term and reduce the total interest. This page shows the size of the effect in one example. It is not a statement about rates that are available.
A worked example
The table compares an example rate of 5.5% with an example rate of 4.5% on the same balance, each with 25 years remaining, assuming the rate stays the same for the whole term and ignoring fees.
| Balance | Monthly payment at 5.5% | Monthly payment at 4.5% | Payment difference | Interest difference over the term |
|---|---|---|---|---|
| £100,000 | £614.09 | £555.83 | £58.26 a month | about £17,475 |
| £150,000 | £921.13 | £833.75 | £87.38 a month | about £26,215 |
| £200,000 | £1,228.17 | £1,111.66 | £116.51 a month | about £34,953 |
| £250,000 | £1,535.22 | £1,389.58 | £145.64 a month | about £43,690 |
| £300,000 | £1,842.26 | £1,667.50 | £174.76 a month | about £52,431 |
If you kept paying the higher amount after the rate fell, the difference would act as an overpayment, if your mortgage allows it. See what if your rate falls and you keep paying the same.
Questions worth asking
- What rate and terms are available for your balance, your property value and your circumstances? This page cannot say.
- What do fees, or a charge for leaving your current deal early, add to the comparison?
- Does the lower rate last for the whole term, or only for a deal period?
Figures are estimates from this site’s calculator, using the assumptions stated above each table. The rates, fees and property values shown are examples, not figures that are available to you. They are illustrations, not forecasts. Try your own figures in the free mortgage overpayment calculator.
If you are thinking about remortgaging or overpaying, consider speaking to a regulated mortgage adviser. This page is general information, not advice on your circumstances.
Questions people ask
How much does 1% off a mortgage rate save?
It depends on the balance and the remaining term. The table shows one example, for a fall from 5.5% to 4.5% with 25 years remaining.
Does a lower rate shorten my mortgage?
Not by itself. A lower rate usually lowers the payment for the same term. Keeping the old payment, or overpaying, may shorten the term, if your mortgage allows it.
What rate can I get?
That depends on the lenders you apply to and your circumstances, so this site cannot say. A regulated mortgage adviser may be able to help.
Other ways to look at it
remortgaging or overpaying, remortgage fees and the break-even point, overpaying before you remortgage and loan-to-value, a shorter term or overpaying, what your payment could be when your deal ends. For how overpayments and remortgaging interact more generally, see what happens to overpayments when you remortgage and how overpayments affect your remortgage rate.