Lloyds mortgage overpayment extension could boost equity release sector

Lloyds Banking Group is amending its rules to enable homeowners to increase their mortgage overpayments, in a move that could boost the equity release sector in the coming years.

The bank has launched its new scheme under which customers with variable rate mortgages can overpay by up to 20 per cent without any financial penalty – doubling the previous limit.

It is anticipated that the new rules will remain in force until March 31st 2011, giving mortgage holders a year to build up extra equity in their homes.

"With mortgage rates at an historic low, there has never been a better time for the majority of people to overpay their mortgage," said Stephen Noakes, commercial director of mortgages at Lloyds Banking Group.

The move has been described as "very encouraging" by Catherine Hearnden, director at MyMortgageDirect, who pointed out that it provides enhanced flexibility for homeowners and is also likely to attract some new customers to Lloyds.

Ashall Glover Financial Services are equity release specialists