According to research from Monzo, which surveyed around 4,000 adults, UK homeowners could have up to £5.3bn that they would like to put towards overpayments per year, but they lack the “tools or knowledge” to do so.
Monzo said this level of overpayment could save around £2.3bn on mortgage interest and comes as nearly half of households are expected to see increased mortgage costs in the next two years, based on Bank of England figures.
Around 40% said they lack confidence in understanding overpayments, with only 34% currently making overpayments.
A third who don’t overpay said they don’t due to “friction or a lack of understanding” about the impact.
Monzo said many homeowners believe they need to overpay by around £150 per month for changes to be significant. However, £50 per month could cut nearly two years off a typical £195,000 mortgage and save around £7,000 in interest.
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Nearly a third said they still rely on physical statements by post to track their mortgage, with almost a quarter saying they are unsure of their interest rate and 14% said they are unsure of when their deal expires.
More than half of those surveyed said they wanted a better way to manage their mortgages, with over a third saying it would motivate them to lower their debt.
Around 69% of first-time buyers said they wanted to reduce their mortgage debt, term or interest, making overpayments an important tool for this segment.
Monzo allows its customers, which currently number around 11 million, to view their mortgage details in the app regardless of lender.
It said around 300,000 customers benefit from this tool, which also has features like interest rate tracking, deal reminders and a personalised savings calculator for mortgage overpayments.
The bank is calling for “urgent action” from the government to act quickly to deliver open finance in the UK through the Data Use and Access Bill to encourage the sharing of mortgage data industry-wide. It said that, currently, mortgage data sharing is “often sparse and delayed”.
James Shafe, public policy director at Monzo, said: “Homeowners could be saving large amounts on their mortgage but are held back by outdated systems. We’ve heard from customers that they want better tools to make decisions about their mortgage.
“Open finance can help people reduce debt, the amount they pay in interest and the length of their mortgage term, saving money in the long run. Now is the time for the government to deliver on their ambition for the UK to be a world leader in open finance and put more control in the hands of customers.”
