Is now the time to overpay your mortgage?

With the base rate rising to 4% and more increases likely in 2027, you might be wondering whether to put spare cash towards your mortgage or make the most of savings accounts offering rates above 5%.

So is now the time to consider overpaying your mortgage? Or would you be better off putting your money into savings?

Here, Which? explains how overpayments can shorten your mortgage term, what to consider before making extra payments and whether you could be better off saving or investing your spare cash.

How much can you save by overpaying?

In our survey of more than 6,500 borrowers, 53% said they overpaid their mortgage in the past year. The most common overpayment amount was between £1,000 and £2,499. A small group of respondents, 15% of those surveyed, told us they’d overpaid their mortgage by more than £10,000 in the past 12 months.  

The impact of overpaying your mortgage depends on four factors. The overpayment amount, your remaining loan total, term length and the interest rate on the loan. 

For example, someone with a mortgage of £200,000, a remaining term of 30 years and an interest rate of 5% could save almost three years of mortgage payments and more than £20,000 by overpaying just £50 each month. That’s roughly the cost of a couple of takeaways. 

But someone with a mortgage of £100,000, a remaining term length of 10 years and an interest rate of 3% would save less than £1,000 by overpaying the same amount. They would also only cut their mortgage term by seven months. 

If you overpay your mortgage earlier in the term, you’ll make larger savings because more of your monthly payment initially goes towards interest rather than paying off the loan itself. As your mortgage balance falls, more of each repayment goes towards clearing the capital. 

The table shows the impact of making different overpayments on a loan of £250,000 with 25 years remaining and an interest rate of 5%.

• Use our overpayment calculator to see how much you could save by making extra payments. 

Is it better to overpay your mortgage or save?

Alternatively, if you have a lump sum or spare cash each month, you could choose to let your money grow by saving or investing it. 

It’s a good time to be a saver. While mortgage holders have faced rising monthly repayments, returns from savings accounts have improved this year. In fact, the best instant-access, one-year fixed-rate and five-year fixed-rate accounts all offer interest rates above 5%. At the time of writing, the best five-year fixed-rate account pays 5.37%.

If you’re deciding between saving or overpaying your mortgage, comparing the interest rates is a good starting point. If your mortgage and savings account have the same interest rate, the financial benefit will generally be the same, provided you don’t incur tax on your savings interest. 

With savings rates high, borrowers who took out a mortgage in the past 18 months may find that their mortgage rate is lower than the best savings rates available. If you took out a mortgage more recently, the rates may be similar. 

Overpaying your mortgage can also be beneficial if it increases your equity enough to qualify for a lower interest rate. Lenders will typically offer lower rates as your loan-to-value (LTV) ratio falls, with the lowest rates usually available at 60% LTV or below. If you are remortgaging and are close to the next LTV band, overpaying could help you secure a better rate.  

Investing is another way to grow your money, which we investigated earlier in 2026. It offers the potential for higher returns than savings, but there’s also a risk that the value of your investments could fall. 

With savings rates high, you might prefer the certainty of locking your money into a fixed-rate savings account. If you won’t need the cash for at least five years and you are comfortable with the possibility of losing money or earning lower returns, investing may be worth considering. 

• Find out more: best mortgage rates 2026

What to consider before overpaying your mortgage 

Before you decide to overpay, here are three things worth checking. 

1. Have you cleared other debts?

Before putting extra cash towards your mortgage, make sure you’ve cleared more expensive debt first. If you have any personal loans or credit card with higher interest rates than your mortgage, prioritise paying these off. 

Moneyfacts data shows that the average interest rate on a credit card is 27.1%, while the average rate on a £5,000 personal loan is 10.5%. Although mortgage rates are high compared with the previous decade, the average mortgage rate is still much lower, at 5.88%.

• Find out more: best personal loan rates 2026

2. Early repayment charges  

If you’re considering making a large overpayment on your mortgage, it’s important to watch out for early repayment charges (ERCs). These fees can be hefty, potentially reaching 5% of the amount repaid in the first year of a mortgage deal. ERCs are often structured so that the fee decreases each year of your mortgage.

Typically, you can overpay up to 10% of your mortgage balance each year without being charged. While the 10% allowance is by far the most common, some lenders only allow 5%. Others set fixed cash limit on how much you can overpay, such as £999 a month. 

A few mortgages don’t allow any overpayments. When we checked Moneyfacts data on 4 November, only five lenders, all small or specialist providers, offered deals that don’t allow overpayments. 

If you are remortgaging and expect to be able to overpay by more than 10%, make sure you check the ERCs and overpayment limits before choosing a deal. 

• Find out more: how mortgages work

3. Do you have a rainy day fund?  

A broken boiler, failed MOT or lost phone can all leave you unexpectedly dipping into your savings. 

It’s generally recommended to have enough cash to cover at least three months of essential expenses in an emergency fund. Building this up should take priority over mortgage overpayments, so you’re not left short of cash and forced to turn to more expensive forms of borrowing.

• Find out more: best savings rates 2026