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The Bank of England recently revealed that as many as one in ten people in the UK could be in negative equity – to avoid such a fate its time to think of using offset mortgages to overpay your loan.

An estimate based on UK banks’ loan book figures shows 11% of borrowers were affected at the end of the first quarter of 2009 – this means 1.1 million households now face negative equity.

Spencer Dale, chief economist at the Bank of England: “In addition to the considerable financial and personal difficulties that may arise for households faced with this situation, the extent of negative equity can have wider economic and financial consequences. For the majority of households who were in negative equity, the size of that negative equity was relatively small.”

The key to avoiding slipping into negative equity – which makes refinancing very difficulty or at least very costly – is to overpay on your mortgage when you can. The one blessing for homeowners is that the base rate sits at just 0.5% right now, meaning variable mortgage rates are at an all-time low, which gives those with a flexible mortgage a lot of scope to invest in their home and keep their heads above water.

And it’s not just throwing your money away because the more you overpay the more you will have in your home when house prices do rise. That means you will be a better borrower in the eyes of the lenders and will have the opportunity to get hold of a cheaper mortgage in the future.

So talk to a mortgage adviser about how you can overpay with the help of flexible offset. It allows you to invest in the short-term but look to the long-term – and will save you money in the meantime.

SOURCE: Bank of England, 12/06/09

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