first time buyers should consider overpaymentFirst-time buyers who have taken out interest-only mortgages should endeavour to reduce the size of their loans as soon as they find it possible, an expert has advised.

Personal finance website Motley Fool has said that first-time buyers should be mindful of the advice of the Bank of England regarding tightening credit conditions.

Commenting on the issue, David Kuo, Head of Personal Finance at Fool.co.uk, said: "The shift to interest-only mortgages is not unexpected, given the increasingly onerous cost of buying a first home. However, first-time buyers who have made this choice should try to reduce the size of their loan quickly."

He added that borrowers who have taken out 90 per cent mortgages could be put at risk if lenders decide to reduce the maximum loan to value ratio.

Mr Kuo also stressed that borrowers with this kind of mortgage can usually still make overpayments, and that every £1,000 of overpayment will decrease the loan as well as substantially reduce the interest bill.

The Motley Fool has reported that Bradford & Bingley had a successful year despite mortgage arrears increasing by 42 per cent last year.


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