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MORTGAGE holders have seized the opportunity of lower interest rates to plough more money into paying off the principal of their loan, potentially saving thousands of dollars in interest payments.Households have now built up a significant buffer against future interest rate rises, figures from the Bureau of Statistics and Reserve Bank show.While the total amount of outstanding housing debt is still growing - topping the $1000 billion mark in January - the rate at which people are making repayments is growing even fasterFor every $1000 of debt held by households in August, $17 more was taken outBut a further $11 was repaid, meaning outstanding debt rose by only $6.This monthly repayment rate is an increase from $8 in September last year, when interest rates were at decade highs.It reflects both an increased ability to pay, as interest charges have fallen, and a desire by borrowers to reduce their debts.''It is realPeople have taken a very conservative approach to debt repayments in the global financial crisis,'' a spokeswoman for Westpac, Jane Counsel, said.Advertisement While about 75 per cent of its customers had always paid more than the minimum repayment, this had risen to 80 per cent in the past year, she said.A spokeswoman for the National Australia Bank, Luisa Ford, said the ''vast majority'' of customers were ahead on repayments.Part of the increase in repayments reflected the fact that repayment levels with NAB were usually determined only once a year, on the anniversary of a loan start date''Unless a customer actually nominated to reduce their repayments they stayed the same until their anniversary of the loan,'' she said.The head of consumer advocacy at Resi Home Loans, Lisa Montgomery, said the increase in repayments was a deliberate strategy by some borrowers to build some ''breathing space'' for when interest rates rose again, even allowing them to skip a few repayments in the future, if needed.Just a small sum in extra repayments could shave years and thousands of dollars in interest off a loan''Even $10 a week more makes an incredible difference to the term of the loan and reducing interest paid,'' she said. The head of consumer advocacy at ratecity.com.au, Michelle Hutchison, said the savings could be substantial.For someone who took out a $300,000, 25-year loan in the middle of last year, the minimum repayment would have been about $2315 per monthIf that person had kept paying the same amount over the past year and for the remainder of their loan term, they could save about $85,000 and reduce their loan by about seven years (assuming an average interest rate of 6 per cent for the rest of the loan).Loading"The best way to avoid the impact of rising interest rates is to start planning for them now by adding extra to your repayments,'' Ms Hutchison said''You could save thousands as well as knock off years on your loan term.''However, she warned borrowers to check the fine print of their contract for any penalty fees before increasing their rate of repayments.

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