24/04/03

Latest findings from ICM Research on behalf of Direct Line Financial Services shows that while most of us (80%) aspire to retiring early at aged 60, less than half of us (49%) believe we will be able to afford to do this and will have to work until aged 65.1

These extra years of work could be avoided if our mortgages were paid off early. Indeed, the survey showed that if we could pay our mortgage off quicker, over half of us (54%) would retire earlier.2

The findings come as Direct Line Financial Services announces the launch of its current account mortgage, the Direct Line One account. This type of mortgage is one of the quickest and most flexible ways of paying your mortgage off early.

Simply by leaving in an extra £20 in their account a month, an average mortgage holder could pay their mortgage off 5 years early. Even if customers just pay their salary into their account, without leaving any extra money in, One account customers can still slice seven months off their mortgage.3

The Direct Line One account combines customers' borrowings with all of their income into a single account. Interest is calculated daily and customers only pay interest on the difference between their total borrowings and their total deposits. Similarly, any extra money that is left in their account at the end of the month is offset against the amount they owe.

This could save homeowners thousands of pounds in interest and allow them to repay their mortgage years earlier.

Customers can shrink their mortgage term even further by putting any bonuses or savings into their account. Because savings are paid on the loan and not earned, savings are tax free. This means that at least 20 pence in every £1 (or 40 pence in every £1 for a higher tax payer), goes to the customer, not the taxman.

Consumer psychologist, Sue Keane, commented on the findings:
"Having an outstanding mortgage is certainly a major deterrent for us being able to retire early. It used to be common place to buy a family home and stay put, but now property is so expensive that it may take several moves before we can buy our ideal homes. With each move we need to increase the size of our mortgage and carry it into our working life longer.

"We need to plan ahead and attempt to reduce our outgoings so that early retirement becomes a feasible option. The hectic pace of life and the long hours we work mean that many of us want to get off the treadmill and have the freedom to enjoy our retirement as soon as financially possible."

Phil Kennedy, Commercial Director at Direct Line Financial Services added:
"As well as being able plan your finances in a simple and straightforward way, the Direct Line One account can make a massive impact to pay your mortgage off early, making early retirement an achievable dream.

"For example, if you have £50,000 on your mortgage and you pay £2,000 salary at the beginning of the month, you only pay interest on £48,000. No other type of mortgage makes you money work harder and gives you as much flexibility to pay off your mortgage quicker. This has appeal right across the board, whether you earn £20,000 or £200,000."

Provided by Direct Line