HOMEOWNERS who mortgaged themselves to the hilt are facing a bleak future as the housing market slumps and lenders call time on low-interest deals.

Experts say borrowers in the North-East and North Yorkshire are paying a heavy price for the global credit crunch, as mortgage providers increase interest rates and insist on bigger deposits.

Those suffering the most are first-time buyers who took advantage of deals such as Northern Rock's now-scrapped Together loan, which offered a mortgage for up to 95 per cent of their property's value and a personal loan of up to 30 per cent on top.

Terry Hogg, a mortgage expert with Robinsons Chartered Surveyors, in Chester-le-Street, County Durham, said: "Two, three, five years down the line, when they come to remortgage, they are still owing more than 100 per cent of the value of their home."

Mr Hogg said many borrowers then struggled to find an affordable deal with a competitive rate of interest as lenders pull the best deals.

Yesterday's decision by the country's biggest building society, Nationwide, to raise mortgage rates for the fifth time since the start of the year will only have added to the number of homeowners having sleepless nights.

Nationwide customers with a typical base rate tracker repayment mortgage of £158,000 would have paid £968 a month at the start of the year.

Today, they are paying an extra £109 a month - or £1,308 a year.

Bosses at Community Legal Advice, a free advice service paid for by Legal Wid, helped 164 people in the North-East during January alone. Becky Boden Wilks, from the National Debtline, said the service had received 16 per cent more requested for help in 2007 than during the previous year.

The organisation has put together a leaflet to help the 1.8 million lenders nationally who will come off their fixed-rate mortgage this year.

More worrying figures came from the Office for National Statistics, which showed that the proportion of money set aside by UK households last year slumped to its lowest level since 1959.

The household savings ratio fell to 2.9 per cent last year.

Nationally, annual house price growth also fell to its lowest level for 12 years this month as prices dropped for the fifth month in a row.

The average value of a home inched ahead by 1.1 per cent in the year to the end of this month, its lowest rate since March 1996, according to Nationwide.

Prices have fallen by 0.6 per cent during the past month to leave the average property costing 179,110 - 2.9 per cent less than when prices began their downward trend last November.

But on a positive note, Richard

Sayer, the Royal Institution of Chartered Surveyors' North-East housing spokesman, said because national fears are based largely on activity in the South-East, this region has less to worry about.

Mr Sayer, of property firm Rook Matthews Sayer, believes the region is already over the worst of the housing slump. He said: "House prices haven't gone up dramatically here so there is no great reason for them to plunge. On average, they have come down about ten per cent in the past 12 months, which is no great concern. But most buyers are moving up the property ladder, so if their £100,000 house now sells for £90,000, the £200,000 house they want is now £180,000."

Mr Sayer added: "The market has slowed down, partly because of nervous buyers and sellers, but nobody expects it to continue long term. People have to get on with their lives. New buyers need to get on the property ladder and families need more room so things will start moving again after the traditionally quiet Christmas to Easter period."

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