Potentially stupid question about mortgages

[Tocleanornottoclean2]

We are one year into a 2 year fix and have been regularly overpaying. Our payments have now gone down £40, presumably because of the overpayments. I'm a bit confused though, if we pay the 40 back in then I assume this comes off our 10% overpayment allowance. Can anyone explain it to me? Thank you!

There's usually 2 options for overpayments - they're either used to reduce the balance or used to reduce future payments. Sounds like yours is currently set up as the latter but you want the former.

Should have added - on my banking app I think it tells me what I'm set to but I have to call them to change it. Probably just needs a quick call to them.

I'm a bit confused with your question, although as pp have said, usually overpayments will simply reduce the balance. Did you want it set up to reduce the monthly repayments instead ? If not then best speak to your lender & talk to them.

Isn't the 'overpayment allowance' a percentage of the balance at the beginning of the deal, meaning the you can just send another £40 to your mortgage if you want to?

Rationally it doesn't matter if overpayments reduce the monthly payment instead of the term because you just keep sending spare money to your mortgage until it is paid off so the same result either way.

It's 10% from the start of the year. So say you had 40k left, you could only overpay 4k so 333/m, if you re-pay in the 40 quid you can't pay the full 333 in as you'd hit the limit. We owe much more so it doesn't matter, but that's the principle. We phoned them and they said it was a government issued system and they can't do anything about it! The way to get around it is paying off a chunk when you remortgage.