Saving £3 a day can help avoid expensive mortgages

With house prices continuing to decline, homeowners may need to increase their mortgage repayments by £3 a day if they are to reduce the loan size enough to guarantee that they can get a good deal when their current one expires.

That is according to personal finance website Fool.co.uk, which explained that mortgage providers are restricting their best deals to customers with less than 90 per cent of their property value left to pay. Those with more than 90 per cent LTV are being forced onto standard rate mortgages.

David Kuo, head of personal finance, explained that if house prices fall by five per cent, homeowners with a £200,000 five-year deal would need to overpay by £109 a month, or £3 a day, to ensure they reduce the loan enough to comply with the 90 per cent LTV criteria.

“The toxic cocktail of easing property prices and tougher lending criteria means that homeowners must act now to avoid ugly mortgage deals when their current arrangements end,” he said.

Last week, Fool.co.uk urged consumers to submit their claims for unfair bank charges as soon as possible, noting that banks are preparing to appeal the High Court ruling which stipulated that they must pay unfair charges plus interest which occurred in the last six years.