It's now more important to overpay your mortgage than ever before.

Overpaying your mortgage now could lead to a better deal next time you remortgage.

With the Bank of England base rate down to just 2%, many borrowers on tracker and standard variable rate mortgages will now be enjoying lower monthly repayments.

If you can afford to, you may already be making the same monthly mortgage repayments before the reductions of the last 3 months. This means you can overpay your mortgage without actually spending any extra money every month.

Overpayments allow you to do two things: clears your mortgage early, and save interest charges.

Overpaying is a good solution right now.

We all know the dreaded credit crunch has played utter havoc with the mortgage market. A couple of years ago, a 10% deposit or equity stake in your home would have been more than sufficient to secure a decent mortgage deal.

But these days the most competitive home loans are reserved for borrowers with a 40% deposit That’s one reason why it’s so important to get your loan-to-value (LTV) -- which is your mortgage loan as a percentage of the value of your home -- as low as possible. And the quickest way to do that is to pay your mortgage down as quickly as you can by overpaying.

Borrowers with a 60% LTV -- in other words, those who have a 40% equity stake -- could pay an average rate of 4.75%. This is 0.34% lower than the deals available at 75% LTV, and a whopping 1.67% lower than the average rate on offer to borrowers with just 90% LTV.

Having a 60% LTV is a good position for any borrower to be in. However, a 61% LTV normally puts borrowers up into the next category, making interest rates more costly, even though the difference in equity is just 1%.

When you next come to remortgage, you’ll put yourself in the best possible position for a competitive mortgage deal if you manage to get your LTV down. But the trouble is, as house prices continue to fall, reaching that all-important low LTV is becoming increasingly difficult.

According to research by Savills Estate Agents for The Sunday Times, even people who bought homes ten years ago could see the level of equity in their properties slump dramatically by 2010. These homeowners currently have 51% equity, but Savills reckons this could drop to just 25% (or a 75% LTV). If Savills are right, when these borrowers next come to remortgage, the best deals will no longer be in reach.

Indeed, brokers say the average LTV for borrowers who have remortgaged in the last three months is 51%. Right now these homeowners should be able to access the best mortgage deals, but it could be a very different story if house prices do indeed fall significantly by 2010.

So that’s why I think it’s really important to overpay your mortgage if you can. This will help you to combat reducing house prices and reach a lower LTV.

Even if you haven’t just had the benefit of an interest rate cut, it still makes sense for all homeowners to overpay. After all -- credit crunch or not -- the sooner you become mortgage-free, the better!

If you want to discuss your options, you can either telephone me on 08458 386938, or email me using the link above.

Lending for purchases plummets whilst re-mortgages stay resilient.

Mortgage lending for house purchase has dropped almost 50% in March this year compared to the same month last year.

Data from the Council of Mortgage Lenders released this morning shows the number of loans for house purchase dropped 48% to 46,500 in March this year from 89,000 in March 2007.

It was also down 1% from 47,200 in February, but the CML says remortgaging levels held up well in the face of funding constraints.

Today’s figures relate to March mortgage completions.

The CML says the continued decline in lending for house purchase is partly due to the shortage of funding in the mortgage market as a result of credit market conditions.

Gross mortgage lending was £75bn in Q1, down from £83.9bn in Q1 2007.

The number of loans to first-time buyers declined in March to 17,800, down 1% from 17,900 in February and 45% from 32,500 in March last year.

Loans to home movers declined to 28,700, down 2% from 29,300 in February and 49% from 56,300 in March 2007.

Remortgaging activity has remained relatively resilient, increasing during Q1 2008 to £33.3bn which accounted for 44% of gross lending, up from 35% in Q1 2007 and the highest share in three years.

This is likely to be driven by the large numbers of borrowers exiting short-term fixed rate mortgages.

The proportion of other lending, which is predominantly made up of buy-to-let loans and further advances, increased in March to £7.2bn, accounting for 30% of gross lending and up from £6.3bn in February and £7bn in March 2007.

The average first-time buyer borrowed 89% of the property’s value and 3.35 times their income in Q1 2008.

Michael Coogan, director-general of the CML, says: “House purchase transaction volumes will continue to deteriorate in the coming months as recent approvals data from the BoE has shown.

“Since the introduction of the Special Liquidity Scheme, there has been a slight improvement in credit market conditions with LIBOR moving in a more helpful direction. But LIBOR still remains high relative to base rate and any improvement in credit market conditions will take time to feed through into the mortgage market.”

Remortgaging in demand, but FTB's 'wait and see'

Borrower demand for remortgages has increased by 25% in the last four months and has exceeded demand for advice from first-time buyers (FTBs) for the first time ever. The number of FTB's seeking advice is usually between 5 and 10 per cent higher than remortgagors but in September 2007, this switched over for the first time and remortgages have continued to rise and exceed purchases ever since.

An industry spokesman said “Borrowers are really astute at the moment in terms of looking to lower their mortgage rate, as the number of people looking for remortgage advice has risen by 25% since October. (ED: Wait a minute. They said September earlier, who's writing this stuff?) On the other hand the number of first time buyers has dropped, indicating a ‘wait and see’ attitude as they look to see if the housing market goes down any further.”

An experienced mortgage adviser (i.e the writer of this Blog !) said " This is what I've already said, as 1,400,000 people with existing fixed rate deals end during 2008, and the demand to replace these product will increase over the coming months. Therefore the need for Independent Mortgage Advice will also increase, which will keep me in business for the forseeable future, so says my crystal ball" Or else!

However, what's keeping me busy right now are people who have sold existing properties and are buying new homes. As always, 1st Call 4 Mortgages bucks the industry trend !

I'll leave you with a thought to ponder: What was the best thing before sliced bread?