Avoid expensive mortgages for the cost of a coffee

Homeowners could avoid expensive mortgages by making small increases in their repayments, an independent expert has said.

Fool.co.uk has issued the advice to help borrowers whose current mortgage deals may be coming to an end and who could face issues with tougher lending criteria.

David Kuo, head of personal finance at Fool.co.uk, has suggested that even making minor savings could be enough to avoid "ugly mortgage deals".

Mr Kuo said: "A modest fall in house prices means that small overpayments of £3 a day will be enough to reduce the loan-to value to 90 per cent. This is equivalent to giving up a store-bought cappuccino every day."

Borrowers that secured 100 per cent mortgages are the most likely to suffer in the current climate as lenders will reserve the best deals for homeowners with the smallest mortgages.

Those that have borrowed more than ninety per cent of the value of their property could be forced to accept expensive standard variable rate mortgages.

The advice comes in the wake of comment from the Council of Mortgage Lenders (CML) that borrowing costs in 2008 will be "lower and more stable" than in the early nineties.

Mortgages News posted on 30/05/2008 17:31:39