More than a million homeowners could struggle to pay their mortgages this year, the City watchdog says.

The Financial Services Authority said there were three key danger signs for borrowers and lenders: a loan that is more than 3.5 times your income; one that is 95% of the value of the property; or a loan fixed for a period of longer than 25 years.

Borrowers who fall in to two of the above categories are at higher risk of defaulting. Here we outline what you can do to safeguard your mortgage.

Stress test your home loan While interest rates are widely predicted to fall in the short-term, consider how your repayments would increase were interest rates to rise by 1 percentage point.

A £200,000 repayment-only mortgage on a rate of 5.5% has monthly repayments of £1,228. However, if your rate increased to 6.5%, repayments rise to £1,350 – an increase of £122 a month.

Increase your equity You can reduce the size of your loan by using savings from instant access accounts to make overpayments on your mortgage. Most lenders will allow you to overpay up to 10% of the outstanding amount each year without penalty, although Nationwide has a limit of £500 a month.

Melanie Bien of broker Savills Private Finance, said: “Those coming into a large bonus this season can make use of this to make an overpayment on their mortgage – but make sure you don’t commit funds you might need at a later date.

Ask about a payment holiday” If you have overpaid in the past, you may be able to take a break from payments until things get better.

Katie Tucker, mortgage expert at charcol.co.uk, said: “Most borrowers do not realise that their lender is obliged under FSA rules to look upon their situation sympathetically and even offer remedial options.

Check your credit file ” Lenders are making more stringent credit checks so make sure your record is clear.

You can apply direct to any of the credit-reference agencies – Experian, Equifax and Callcredit – to check your credit file. Each report costs £2.

At checkmyfile.com you can check the reports from all three for £16.95.