More than four out of ten mortgage customers are now taking out interest-only loans.

According to Paragon Mortgages, four years ago over 70 per cent chose a repayment (capital and interest) deal, but today only 58 per cent are taking this route.

It’s not hard to see why, but interest-only is a choice they could come to regret.

With house prices rocketing and, more recently, interest rates on the rise, repayment mortgages can seem prohibitively expensive.

Borrow £125,000 at 5.5 per cent over 25 years and you could reduce your costs by nearly £190 a month with an interest-only loan.

That’s more than £56,000 over the full mortgage term.

The only problem is that, at the end of that time, you’ll still owe the original £125,000, which means you’ll actually be almost £69,000 worse off – assuming you can find the cash to clear your debt.

It you can’t, you could lose your home and have nothing to show for all those years of interest payments.

That’s why it’s better to bite the bullet and go for repayment right away.

Back in May, I wrote about the bizarre offer of “overdraft repayments cover” (sic) sent to my 84-year-old mother-in-law by Halifax’s insurance arm.

She has never had an overdraft in her life, is almost 20 years over the age limit stated in the ready completed application form’s small print and, as a pensioner, also breaks the policy’s “must be in paid employment” and “paying National Insurance” rules.

Yet Halifax was keen to charge her £93.60 a year to cover her non-existent debt.

When I phoned to find out what it was playing at, I was told its computer system reckoned she was only 43.

Very flattering, but simply not true.

So I wrote to complain – and this week received a reply including the utterly unhelpful and blindingly obvious admission that “this information appears to have been incorrect” plus a bunch of flowers for my mother-in-law.

What we didn’t get was any kind of explanation of how it could have happened – or a promise that it wouldn’t happen again.

“Time is running out!” screams the flyer from an endowment claims handler that landed on my doormat the other day.

It encourages recipients to get in touch “before it’s too late” if they think they might have been mis-sold a mortgage endowment.

It points out that if your endowment is not going to reach its original target value, you might have a case for claiming compensation.

These things are true.

More than 600,000 people have been compensated because they were mis-sold these mortgage linked investment policies.

And you need to hurry if you want to follow in their footsteps, as many leading policy providers are now enforcing a time limit on claims.

What the firm (which deserves to remain nameless) fails to mention is that a shortfall alone is not grounds for a claim.

And it goes on to urge readers: “Don’t throw your money away.”

Strangely, it doesn’t mention how much it charges for its services, so I visited its website to check.

Turns out it’s a whopping 25 per cent of any cash received – money that’s meant to make up the mortgage shortfall.

If it really means what it says about not throwing money away, it should be giving would-be claimants the advice they really need: make the claim yourself.

It’s not difficult, you’ll be just as likely to succeed – and it won’t cost you a penny.

With the ban on smoking in enclosed public spaces and workplaces coming into force in England on July 1, now might be a good time to stub out the habit once and for all.

It could save your finances as well as your health – and not just because cigarettes went up 11p a packet in the last Budget.

Smokers often don’t realise how much their habit costs them.

Independent financial adviser Jason Hemmings points out: “For someone on the average wage smoking 20 a day, 15 per cent of their disposable income is being spent on their habit.”

Giving up would leave them around £2,000 a year better off, while an individual or household getting through two packs a day could be £4,000 richer.

Over 25 years, that’s £100,000 – enough to pay off the bulk of the typical mortgage.

And if you use that cash to make regular, or even occasional, overpayments, you could be mortgage free years early, saving thousands of pounds in interest in the process.

Well done (how nice to be saying that for a change) to the Royal Bank and Standard Life for their efforts to ensure youngsters grow into financially responsible adults.

The Royal is celebrating the fact that 200,000 Scottish secondary school pupils have completed its Face2Face with Finance programme, while Standard Life has helped to launch On the Money, aimed at primary pupils.

Cynics will say they’re just recruiting fledgling customers.

Of course, it would be better if children received their information from an impartial source, but if this is the only way they can get a financial education, then it has to be better than nothing.

And if the programmes work, the kids should grow up savvy enough to decide for themselves if they want to give the Royal and Standard Life their custom.

But maybe they need to target a wider age group.

Apparently 10 per cent of Standard’s former members still haven’t bothered to claim their share of last year’s demutualisation windfall – that’s a total of £275 million it simply can’t give away.

Sounds like they could do with going back to school to study On the Money.

I despair. It seems that an increasing number of homeowners are remortgaging to clear other debts.

According to Moneyextra.com, the average remortgage is now £122,541, up 7 per cent on a year ago, partly because of people using the equity in their homes to pay off other borrowing.

No doubt they like the idea of spreading their repayments over up to 25 years (or more) because it reduces the monthly cost, making them feel like they’re paying less.

But this is a total illusion – even if they’re reducing their interest rate by moving what they owe from credit cards or personal loans.

The very fact that the new repayments are spread over decades means they’re going to be paying one hell of a lot of interest, and it will probably cost them far more in the long run.

Remember, the whole idea of remortgaging is to save cash, not throw it away.

In the world of personal finance, it isn’t always immediately obvious when something is a good deal.

But spending a little time with a calculator generally sorts things out.

A correspondent writes: “I am considering transferring a balance of (several credit cards) £721 plus adding £482 (for carpets) to an Abbey 0% interest card deal. It lasts till March 2008.

“The snag is that they are charging £37.50 for the total amount. I did tot up my interest on the cards and it comes to £96 over 9 months.

“The alternative is just to use my savings from my Isa. What do you think?”

The key thing is to compare the £37.50 balance transfer cost with the amount of Isa (individual savings account) interest that would be lost if it was used to pay off the debt now.

If this is more than £37.50, it’s worth making the transfer and clearing the debt with Isa cash after nine months. If the lost interest is less than £37.50, it’s better to clear the debt now.

Say the Isa interest rate is 6 per cent. That will be worth £54.14 on £1,203 (the total debt) over nine months, so it would be best to leave the Isa cash alone until the end of the interest-free period.

Investing a bit of time working these things out not only makes you feel more on top of your finances – it saves you money too.

At last some good news. It seems that almost two-thirds of us don’t trust our bank.

Yes, that is good news.

A poll by MortgageSorter.co.uk found 62 per cent of people don’t think their account provider puts their best interests first, and fewer than one in ten said they had complete faith in their bank.

In an ideal world we would all be able to trust financial institutions to behave decently and not try to rip us off at every turn with over-priced, shoddy products.

But, sadly, that’s not where we live.

As MortgageSorter’s Edward Parry points out: “The banks’ main priority is pleasing their shareholders, not serving the public.

“The big five – Royal Bank of Scotland, Halifax/Bank of Scotland, Barclays, HSBC and Lloyds TSB – reported a combined profit of around £38 billion last year.

“That works out at more than £100 million a day, and you don’t make that kind of money by putting customers first.”

Which is why, no matter what kind of financial product you’re after, it’s vital to shop around for the best possible deal to suit your needs – and not the banks’.

Apparently, we don’t learn when it comes to the “hidden” costs of moving house.

These include all the expenses that we have to cough up, often without feeling the final bill is justified – legal and estate agents’ fees, stamp duty, removal costs and so on – and they leave us almost £24,000 poorer over our lifetimes.

Despite knowing these costs come up time and again, only half of those questioned in a Co-op Bank survey had a contingency fund to cover them, relying instead on borrowing.

True, things like stamp duty are fixed costs which just have to be swallowed, but you can shop around to get a better deal on many of the others.

And when it comes to the hidden costs attached to your mortgage, a bit of knowledge goes a long way.

Reading the small print may not be fun, but it could save you thousands in the long run.

While on the subject of pensions, another correspondent asks, “Can someone please clarify the amount of the basic state pension for me, as I am getting nearer my retirement date and it is very important to me.”

This question isn’t as simple to answer as you might imagine.

That’s because, contrary to what most people think, a full basic state pension – which is currently £87.30 a week – is not an automatic right.

To qualify for a minimum pension – worth just a quarter of the basic weekly amount – men must pay full-rate National Insurance contributions for 11 tax years and women for 10.

To get the full basic pension men need 44 years and women 39 – though this will fall to 30 years for both sexes from 2010.

If your contribution record is patchy, depending on when you’re due to retire, it may be worth making back payments to increase your entitlement.

To check your individual situation, get a forecast of your state pension entitlement.