Halifax Overpayments

2catsandcounting

We have a fixed rate mortgage with Halifax until January 2028, and after we were both promoted at work decided to overpay on the mortgage by £150 month. I have also recently started using the sprive app to generate additional overpayments. We’re allowed to overpay by 10% a year and are well within that.   We recently got the annual statement and they are reducing the direct debit by just over £5 a month. Is this normal or have we messed up somehow? Should be have told them we wanted it to come off the capital? 

Thanks for any advice.  

MWT

2catsandcounting said:

We recently got the annual statement and they are reducing the direct debit by just over £5 a month. Is this normal or have we messed up somehow? Should be have told them we wanted it to come off the capital? 

As you say you are well within the 10% overpayment allowance you can just increase your overpayment by £5 to keep it at the same level.

The capital is reducing but what they are doing is keeping your term the same, so the monthly payment has been reduced accordingly. 

penners324

You are paying off the capital.

It's an annual adjustment to keep your term length the same.

Just add the extra as an overpayment on your standing order

saajan_12

2catsandcounting said:

We have a fixed rate mortgage with Halifax until January 2028, and after we were both promoted at work decided to overpay on the mortgage by £150 month. I have also recently started using the sprive app to generate additional overpayments. We’re allowed to overpay by 10% a year and are well within that.   We recently got the annual statement and they are reducing the direct debit by just over £5 a month. Is this normal or have we messed up somehow? Should be have told them we wanted it to come off the capital? 

Thanks for any advice.  

It is still coming off the capital, you haven't messed up. 
They've just recalculated your monthly payments because the balance is lower, so you need to pay less interest each month (which is the whole point of overpaying).
£150 x 12 = £1800 overpaid off the capital in a year
1800 x 3.3% / 12 = £5 a month less in interest next year (based on a made up 3.3% interest rate)

Your term length will reduce because you now have £1800 less capital after a year. However you can overpay even more by putting the £5 saved interest towards overpayments, so it becomes £155 a month ie £1860 a year overpaid next year. 

2catsandcounting

Thank you all. That makes sense! I’ll adjust the overpayment SO to cover the £5 reduction