Reducing the mortgage term is not the only way for customers to lower the overall cost of borrowing, and Advisers should always consider whether alternative approaches may be more suitable. Many Lenders already offer overpayment facilities, which allow customers to reduce their balance more quickly without committing to a shorter term. This option can provide greater flexibility, enabling customers to make additional payments when affordable but without locking themselves into higher monthly repayments.
For customers with fluctuating incomes or those who may value flexibility, overpayments could represent a safer and more sustainable option. Similarly, customers might benefit from a combination of approaches, for example, making regular overpayments now, with a view to formally reducing the term in the future once they have greater certainty about their finances.
Where customers do wish to reduce their term, Advisers should explain why this route may be preferable to overpayments (or vice versa) in light of the client’s circumstances and objectives. Documenting this rationale on the file will provide clear evidence of how suitability was assessed and ensure the advice aligns with Consumer Duty requirements.
Ultimately, Advisers should frame the conversation around empowering customers to make effective, informed choices. Whether through a formal term reduction, overpayments, or a combination of the two, the aim is to help customers manage their borrowing responsibly while avoiding unnecessary risks.
