The Sprive app is designed to help monitor borrowers’ money habits to help work out automatically how much they can afford to overpay, and then makes those payments on their behalf.
While intermediaries were positive about any innovation that gets borrowers to think about overpayments, they stated that it’s a crucial conversation topic for all advisers to have with their clients.
How Sprive works
Sprive is designed to make it easier for borrowers to make overpayments on their mortgage.
Users connect their bank account to the app, which then monitors their money habits in order to calculate how much they can afford to set aside for overpayments. The user can then approve the money being sent to their mortgage lender as an overpayment, or else choose to withdraw the money back into their bank account.
Sprive, which is regulated as an appointed representative of broker Albany Park for mortgage services, currently works with a limited number of lenders, including: HSBC, Lloyds, Barclays, Santander, Royal Bank of Scotland, Virgin Money, Halifax, NatWest, Yorkshire Building Society, Accord Mortgages and TSB.
The firm, which doesn’t charge users, has said that it plans to expand its roster of lenders. Its future money-making plans revolve around developing a tool which will scan the market for cheaper deals, with Sprive earning a commission should it help the borrower remortgage.
Growing mortgage terms
David Hollingworth, associate director of communications at L&C, said he was confident that brokers highlight the ability to overpay already, noting that for those who have a serious intention to regularly overpay it could influence the product or lender choice.
He added: “There can’t be too much done to spell out the flex that lenders have built in and the potential benefits that it could offer, especially as we see more buyers using longer mortgage terms.”
Hollingworth suggested that while overpayments are an issue that should be highlighted for both purchase and remortgage customers, “it feels like a more serious consideration for those remortgaging”.
Clients need to look at other debts too
Dominik Lipnicki, director of Your Mortgage Decisions, said it was vital for all advisers to discuss the ability to make overpayments with their clients when setting up a mortgage, noting that overpayments are nothing new, with most lenders allowing up to 10 per cent to be paid before ERCs are incurred.
He added: “Making extra mortgage payments will of course save interest and cut the term but when looking at overpaying, clients need to look at what interest they are paying on other debt.”
Hollingworth added that while overpayments are already discussed with clients, they should be “regularly underlined, especially when savings rates are so low”.
A question of discipline
Sprive isn’t the first innovation aimed at encouraging borrowers to overpay on their mortgage. Last year saw the launch of Accelerate My Mortgage, a cashback website from broker RateSwitch, where the cashback earned when shopping online is paid directly to the mortgage lender on top of the regular monthly payments.
Lee Flavin, founder of Accelerate My Mortgage, said he welcomed any service that helped more borrowers to pay off their mortgages early, and said that one bonus to the Sprive system was that it would help borrowers to make those overpayments almost subconsciously.
He continued: “Every borrower likes the idea of making overpayments, for example for when they get a pay rise. But whether they go ahead and do it, and then stick with making those overpayments, it’s hard to say.”
This was echoed by Hollingworth, who pointed out that while many borrowers will want to have the option to overpay, they then need to have the financial discipline to get around to making those overpayments.
“It can easily end up being something that they never quite get round to, even when they have built up some savings beyond a rainy day fund,” he added.
“Solutions like a savings app could help nudge borrowers to go ahead, put aside savings and then make the move to overpay. I suppose it’s harder to predict if that will be something adopted by those that are already serious about overpaying or if it could ultimately help more borrowers make the move to overpaying.”