Lenders for your ups and downs

Clifford German explains the attractions of flexible payment mortgages

Fixed rate mortgage offers might start disappearing, to be replaced by a new and more expensive range as lenders run out of cash secured at summertime rates. But flexible mortgages seem certain to become more popular in future.

Borrowing on flexible mortgages is usually at variable rates, which will go up and down with the general level of interest rates in the economy.

The real flexibility however comes from the ability to vary the amounts and/or the timing of repayments independently of the current rates of interest. As the table compiled by data providers MoneyFacts shows, around a dozen lenders offer various kinds of flexible mortgages.

Borrowers whose earnings fluctuate from month to month - a category which includes contract workers as well as the outright self-employed - can pay what they can afford, and employees who get an annual bonus can use it to pay down debts instead of financing a seasonal spending spree.

Women who need a career break to bring up children can also take advantage of a flexible mortgage to reduce payments in line with reduced earnings and catch up again when they return to work. Anyone still worried about the risk of a rerun of the property slump plunging them into negative equity has the automatic option of accelerating monthly payments in good times to build up a cushion of equity in case the bad times return.

But it is important to choose the right lenders for your circumstances. Most - but not quite all - will allow overpayments; most also allow borrowers to reduce monthly payments for a while, as their financial circumstances change, and some allow interest and/or capital repayment holidays, provided the initial loan has been reduced sufficiently to create some leeway.

Some lenders, including Bank of Scotland, and the Market Harborough, Tipton & Coseley and Stroud & Swindon building societies, also allow borrowers to use the mortgage account as a kind of bank and draw cheques on the account to pay for home improvements, or indeed any other purpose. Most specify a minimum withdrawal of pounds 500, but there are no restrictions on the use the money is put to, as long as the account has built up enough credit to cover the additional borrowings.

The increase itself is not eligible for Miras even if it is within the pounds 30,000 limit eligible for tax relief. But the flexible mortgage is still a very cheap source of credit, well below the cost of a conventional personal loan, or even cash borrowed on gold cards or the new premium current account planned by NatWest Bank.

Flexible mortgages can be combined with an endowment policy, a pension or PEP, but repayment mortgages will automatically create the headroom needed to re-borrow money when required. With endowment, PEP or pension policies which only repay the loan as a lump sum at the very end of the term, it is necessary to make overpayments first, to create the necessary headroom.

The main drawback to flexible mortgages at present is the cost of the underlying loan. Clydesdale Bank offers some fixed-rate flexible mortgages, and First National BS and Mortgage Trust combine flexible mortgages with up-front discounts, although they limit additional borrowing to a bare pounds 50. But the vast majority of flexible mortgages charge a standard variable rate, with no scope for discounted rates, and rely on the flexible repayment facility to keep borrowers loyal.

Only Stroud & Swindon and Tipton & Coseley offer incentives, in the form of cashbacks rather than discounts, and these are repayable if borrowers do not stay for a set minimum time after they have taken the incentive.

rFirstMortgage, one of the mortgage by phone traders, has opened what it calls the first "mortgage supermarket", offering its own mortgages plus the products of 15 other lenders on its panel. It is becoming increasingly difficult for a single lender to be competitive across the whole range of mortgage options, says chief executive Nick Deutsch.

The range is also targeted at busy borrowers who do not want to shop around and will be attracted by a wide choice from a single source. Regulated insurance products are not supplied so an offer can be made in 15-20 minutes, against the 90-120 minutes a full fact-find may take.

Current offers include fixed rates from 1.95 per cent for a year, 4.35 per cent for two years, 6.45 per cent for three years and 7.24 per cent for five years. Variable rates range from 5.95 per cent with discounts of 3.99 per cent for a year up to 1.52 per cent for five years.

What's on offer on the flexible mortgage front

Product name

Abbey National

Flexi-break

Bank of Scotland

via local branch

Mortgage Direct

Centrebank

Personal Choice

Clydesdale Bank

Flexible Repayment Mtg

First National BS (NI)

Mortgage Trust

Early Payment Plus

Homeloans Direct

Flexible Repayment Mtg

Legal & General Mortgage Servs

Mortgage by Design

Market Harborough Building Soc

Mortgage by Design

Mortgage Express

Choices

Stroud & Swindon Building Soc

Flexible Mortgage

Sun Banking Corp

Reflex Mortgage

Tipton & Coseley Building Society

Lifestyle

Yorkshire Bank

Flexible Payment Mortgage

Variable rate %

7.04

6.99

6.49/6.99 and fixed rates

Any variable product

6.45

6.24

6.99

Any product

6.99

6.99

6.24

6.99

Overpayment

No

Monthly. If lump sum, min pounds 500

Yes

Yes

Monthly. If lump sum up to 20% pa

Monthly min pounds 50. If lump sum min pounds 500

Monthly. If lump sum - Ist 4 yrs 10% of o/s balance

Yes. Min pounds 25

Yes

Lump sum - min pounds 750. Max 3 p.a.

Yes

Monthly fixed for 1 yr. If lump sum no min

Monthly underpayment

No

Yes, maximum o/s balance - 6 monthly instalments

No

Yes within available reserve

Yes, set minimum

Yes within available reserve

Yes, fixed for up to 2 years

Yes

No

No

No

Yes, fixed for 1 year

Lump-sum withdrawal

No

Min pounds 500. Max 12 cheques pa

No

pounds 50 within available reserve

No

Yes within available reserve

Min pounds 500

Yes within available reserve

Min pounds 500, max 6 withdrawals in 12 mth period

Min pounds 750, 3 free withdrawals pa then pounds 25 each

Min pounds 1000. 4 withdrawals pa after 3 mths

No

Payment holiday

per year

After 9 mths, up to 8 int free payments in 1st 5 yrs

Yes

No

Yes

No

Yes

Yes after 1st year

Yes

No

No

Max 6 mths after 1st yr

No

Additional notes

Bank of Scotland fee pounds 250. Others no fee

Rate 6.49% if bank's buildings and contents inurance arranged

Available on self-certification, max 75%

Incentives - free valuation and pounds 350 towards costs

3% of adv cash rebate. Free insurance offers. Fee pounds 295

If over 95%, overpayment facility only

3% of adv rebated over 1st 3 yrs. (Rmtgs 2% over 2 yrs). Free valuation/legal costs

Fee pounds 150

Advance pounds 50K-pounds 250K

Fee pounds 150 (inc valuation)

Sport
Thiago Silva pulls Arjen Robben back to concede a penalty
world cup 2014Brazil 0 Netherlands 3: More misery for hosts as Dutch take third place
Sport
Robin van Persie hands his third-place medal to a supporter
Van Persie gives bronze medal to eccentric fan moments after being handed it by Blatter
News
Ian Thorpe had Rio 2016 in his sights
people
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
scienceScientists have developed a material so dark you can't see it...
News
Monkey business: Serkis is the king of the non-human character performance
peopleFirst Gollum, then King Kong - now the actor is swinging through trees in Dawn of the Planet of the Apes
Arts and Entertainment
Blackman: Landscape of children’s literature does not reflect the cultural diversity of young people
booksMalorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
Voices
Mrs Brown's Boy: D'Movie has been a huge commercial success
voicesWhen it comes to national stereotyping, the Irish know it can pay to play up to outsiders' expectations, says DJ Taylor
Arts and Entertainment
Curtain calls: Madani Younis
theatreMadani Younis wants the neighbourhood to follow his work as closely as his audiences do
Life and Style
Douglas McMaster says the food industry is ‘traumatised’
food + drinkSilo in Brighton will have just six staple dishes on the menu every day, including one meat option, one fish, one vegan, and one 'wild card'
Life and Style
Once a month, waistline watcher Suran steps into a 3D body scanner that maps his body shape and records measurements with pinpoint accuracy
techFrom heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
News
Soft power: Matthew Barzun
peopleThe US Ambassador to London, Matthew Barzun, holds 'jeans and beer' gigs at his official residence. He says it's all part of the job
Sport
Joe Root and James Anderson celebrate their record-beaking partnership
cricketEngland's last-wicket stand against India rewrites the history books
News
Gavin Maxwell in Sandaig with one of his pet otters
peopleWas the otter man the wildlife champion he appeared to be?
News
Rowsell says: 'Wearing wigs is a way of looking normal. I pick a style and colour and stick to it because I don't want to keep wearing different styles'
peopleThe World Champion cyclist Joanna Rowsell on breaking her collarbone, shattering her teeth - and dealing with alopecia
Finacial products from our partners
Property search

Consumers given power to choose a green deal

How would you like to be able to choose how your electricity is made and even where it come from? It may sound futuristic and fanciful but the independent supplier Co-operative Energy has made it a reality this week.

'Scrap the trap': calls for change grow as banks are told to play fair with loyal savers

City regulator says existing customers suffer worst rates

Motor insurers divided on proposals for whiplash ban

MPs want medical evidence for claims. Will this bring higher premiums?

British Gas repays £1m for mis-sold deals

British Gas was yesterday forced to pay back £1m to its customers after mis-selling them energy deals.

Bare necessities of life cost a pensioner £10,000

Pensioners now have to spend £10,387 a year on basic necessities such as food and fuel. new figures published today reveal.

Six months since its introduction, Obamacare has set market's pulse racing

As America's health reforms take effect, some firms look well placed to benefit, says Simon Read

Holidaymakers warned over hidden charges when opting to pay in sterling abroad

Fresh warnings emerged this week that overseas retailers and hotels aren't playing fair.

Employees will be able to request flexible hours in drive to make workplaces family friendly

From next week employees will be able to request changes to working hours. Rob Griffin weighs up the options

E2Energy's wind-turbine scheme offers green investors 7.5 per cent a year

If you're fed up with paltry returns on your savings and are interested in green energy, a new loan-based crowdfund launched this week could be a better home for your cash.

Why miss the chance of tax-free returns as Isas raise their game?

The tax-free limit of £15,000 is a big jump and rates for savers are starting to edge up, writes Simon Read
More and more trade drivers are falling prey to fraudsters

'Crash for cash' gangs target white van man

"Crash for cash" accidents are reaching record levels. The insurer Aviva trawled through its claims data to discover that fraudulent "slam-ons" – accidents deliberately caused in order that claims can be made for whiplash compensation – rose by 51 per cent in 2013.

Lenders lose their appetite for debt forgiveness

Banks may be getting tougher with people who fall into financial difficulties, a debt charity has warned. Statistics from The Money Charity reveal that the amount of personal debt written off by banks and building societies reached an all-time low during the first quarter of the year.

Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Information Security Manager (ISO 27001, Accreditation, ITIL)

    £70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

    Biztalk - outstanding opportunity

    £75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

    Trade Desk Specialist (FIX, Linux, Windows, Network Security)

    £60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

    Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

    £35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

    Day In a Page

    Iraq crisis: How Saudi Arabia helped Isis take over the north of the country

    How Saudi Arabia helped Isis take over northern Iraq

    A speech by an ex-MI6 boss hints at a plan going back over a decade. In some areas, being Shia is akin to being a Jew in Nazi Germany, says Patrick Cockburn
    The evolution of Andy Serkis: First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes

    The evolution of Andy Serkis

    First Gollum, then King Kong - now the actor is swinging through the trees in Dawn of the Planet of the Apes
    You thought 'Benefits Street' was controversial: Follow-up documentary 'Immigrant Street' has got locals worried

    You thought 'Benefits Street' was controversial...

    Follow-up documentary 'Immigrant Street' has got locals worried
    Refugee children from Central America let down by Washington's high ideals

    Refugee children let down by Washington's high ideals

    Democrats and Republicans refuse to set aside their differences to cope with the influx of desperate Central Americas, says Rupert Cornwell
    Children's books are too white, says Laureate

    Children's books are too white, says Laureate

    Malorie Blackman appeals for a better ethnic mix of authors and characters and the illustrator Quentin Blake comes to the rescue
    Blackest is the new black: Scientists have developed a material so dark that you can't see it...

    Blackest is the new black

    Scientists have developed a material so dark that you can't see it...
    Matthew Barzun: America's diplomatic dude

    Matthew Barzun: America's diplomatic dude

    The US Ambassador to London holds 'jeans and beer' gigs at his official residence – it's all part of the job, he tells Chris Green
    Meet the Quantified Selfers: From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor

    Meet the 'Quantified Selfers'

    From heart rates to happiness, there is little this fast-growing, self-tracking community won't monitor
    Madani Younis: Five-star reviews are just the opening act for British theatre's first non-white artistic director

    Five-star reviews are just the opening act for British theatre's first non-white artistic director

    Madani Younis wants the neighbourhood to follow his work as closely as his audiences do
    Mrs Brown and her boys: are they having a laugh?

    Mrs Brown and her boys: are they having a laugh?

    When it comes to national stereotyping, the Irish – among others – know it can pay to play up to outsiders' expectations, says DJ Taylor
    Gavin Maxwell's bitter legacy: Was the otter man the wildlife champion he appeared to be?

    Otter man Gavin Maxwell's bitter legacy

    The aristocrat's eccentric devotion to his pets inspired a generation. But our greatest living nature writer believes his legacy has been quite toxic
    Joanna Rowsell: The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia

    Joanna Rowsell: 'I wear my wig to look normal'

    The World Champion cyclist on breaking her collarbone, shattering her teeth - and dealing with alopecia
    Bill Granger recipes: Our chef gives raw ingredients a lift with his quick marinades

    Bill Granger's quick and delicious marinades

    Our chef's marinades are great for weekend barbecuing, but are also a delicious way of injecting flavour into, and breaking the monotony of, weekday meals
    Germany vs Argentina World Cup 2014 preview: Why Brazilians don't love their neighbours Argentina any more

    Anyone but Argentina – why Brazilians don’t love their neighbours any more

    The hosts will be supporting Germany in today's World Cup final, reports Alex Bellos
    The Open 2014: Time again to ask that major question - can Lee Westwood win at last?

    The Open 2014

    Time again to ask that major question - can Lee Westwood win at last?