Mortgage worries and house price falls - enough to turn you to drink

For less than the weekly cost of a couple of rounds of drinks, or a daily frothy coffee, homeowners could stave off future shortfalls in the interest only part of their mortgage.

By overpaying the monthly amount by £109, or just £3 per day, house prices can fall by up to five per cent of the mortgage value before causing re-negotiation difficulties.

David Kuo, head of personal finance at Fool.co.uk, says: "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.

"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. Extreme circumstances require extreme measures. So total up what you need to cover bare essentials, and cut out everything else. If your resolve weakens, just ask yourself if it's more relaxing paying to watch repeats on cable television or knowing that you can afford to pay your mortgage."

May 29^th 2008

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