Record number now own home outright

New study reveals almost one in three are now mortgage-free.

New research has found that a record-breaking number of us now own our homes outright. According to data from The Money Charity, 31% of households now own their homes mortgage-free.

This is fantastic news for those people who have managed it, especially as the Bank of England's Base Rate looks set to rise within months, taking mortgage rates with it. There are 11.1m households who still have a mortgage and on average they owe £114,535. With an average mortgage interest rate of 3.09%, that means they are paying £3,539 in mortgage interest each year, according to The Money Charity.

At the moment 48 properties are repossessed every day. The stats are moving in the right direction with the number of mortgages with arrears of over 2.5% of the remaining balance falling by 67 a day, but if interest rates rise that stat could reverse.

Paying off your mortgage

If you want to escape the burden of your mortgage and join that lucky 31% who are mortgage free, then you need to think about overpaying on your mortgage.

Paying a little more each month towards your mortgage can dramatically cut the time it takes to pay it off. Most mortgage deals cap how much you can overpay by each year at around 10%, but even that can make a big difference.

Let's take a look at an example. Say you owed £115,000 over a 25-year term on a mortgage with a 3.09% interest rate. Your current monthly mortgage repayment will be about £551 a month. Now, if you bumped that up by 10% and paid off £606 a month instead, you'd clear your mortgage three years and three months early, saving more than £7,000 in interest. 

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The rental struggle

While life is pretty good right now if you own your home, it is a different story for renters. According to The Money Charity's research, 19% of households are now rented privately, the highest proportion since the 1960s.

Those people who are renting their home are having to put a whopping 43% of their income towards housing costs. In contrast, owner occupiers spend only 19% of their income on housing costs on average.

One reason for this huge disparity is rising rent. Private rents rose by 2.1% in the 12 months to March 2015, according to the Office for National Statistics. In contrast low interest rates mean mortgages are relatively cheap at the moment.

Trying to get on to the housing ladder is harder than ever though. The Council of Mortgage Lenders found that the average first-time buyer deposit in April was £23,443 – 91% of the average annual salary.

So if you want to try to put a deposit together, you need to find savings in your monthly outgoings. Write down exactly where your money is going each month and see if there are areas where you can spend a little less. Perhaps move your broadband or switch your mobile phone tariff. 

You should also look at ways to generate some more cash. Read How to make some extra money for ideas.

And when you do start building up a deposit, make sure it is earning the most possible interest! Read Where to earn most interest on your cash.

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More from loveMONEY:

Where to earn most interest on your cash

How to make some extra money