Borrowers get smart

Homeowners taking advantage of falling rates open themselves up to better mortgage. Commenting on Bank of England figures showing homeowners cutting their mortgage debt, Louise Cuming, head of mortgages at moneysupermarket.com, said: "People seem to have seen the light when it comes to their money, and are becoming more astute with their finances. These figures show homeowners are taking advantage of successive rate cuts to overpay their mortgage and reduce their debts. This is undoubtedly a positive sign that financial turmoil has turned people's attention to the management of their personal finances.

"Overpaying your mortgage is a good move on two fronts. Firstly, you reduce the amount of interest you pay over the life of the mortgage. Secondly, you increase the amount of equity in your home, meaning when it comes to remortgaging your property, you can find a better deal.

"Lenders are becoming increasingly obsessed with equity. The lowest fixed rate mortgage for someone with 10 per cent equity is currently 5.99 per cent with the Yorkshire Bank, but for those with 25 per cent equity, you can get 3.49 per cent with Alliance & Leicester. On a £150,000 mortgage, that's a difference of £5,170 over two years - a huge incentive to increase the equity in your home by overpaying."