James Daley: If there's no such thing as a free lunch, what does a free car cost?

West Bromwich Building Society caused a bit of a stir in the personal finance world last week by announcing it was to become the first ever lender to give away a free car with every mortgage.

West Bromwich Building Society caused a bit of a stir in the personal finance world last week by announcing it was to become the first ever lender to give away a free car with every mortgage. As West Brom well knows, it's the kind of offer that is quite hard to ignore. For most people, buying a car is a fairly big deal, and normally takes some financial planning and perhaps some saving too. So to be offered a free one appears to be too good to be true.

What's more, the catch - there is of course a catch - doesn't appear to be too onerous: stick with West Brom's standard variable rate, currently a reasonably competitive 5.99 per cent, for five years - then you're free to transfer to anyone you like.

West Brom's offer is, however, not quite as great as it sounds. In fact, for most people, it will be totally unsuitable. Unfortunately, this will be unlikely to stop people signing up in their droves.

The problem with this sort of give-away is that it takes your eye off what's most important - as the likes of West Brom are well aware. Sainsbury's Bank offers 30,000 nectar points with its flexipay mortgage (enough for a free flight to just about anywhere in Europe), MBNA gives away Accurist watches with its credit cards, and HSBC hands out driving lessons with its student accounts.

The firms behind these handouts remain adamant that there is nothing wrong in using customer enticements in a competitive market. But the truth is that this sort of practice is not far short of plain irresponsible. Sure, taking freebies to open a bank account, which has no tie-ins, is pretty harmless. But when you're encouraging punters to take out credit cards by giving away gifts or offering free cars to bring in mortgage customers, you will undoubtedly get people bending over backwards to take on products which they should never have gone near.

Taking out a mortgage is, for most people, the biggest single financial transaction they will make in their lives, and ensuring that your monthly payments are manageable, both now and in the case of potential rate rises, is the most important factor to consider. Not whether or not you get a freebie.

The best deals on the market at the moment are almost 2.3 percentage points cheaper than West Brom's free car offer - a saving of nearly £300 a month on a £150,000 mortgage - which is real money to most people. Tying yourself into a standard variable rate for five years is dangerous too. You'll take the full hit on every rate rise - and who knows what will happen to rates between now and 2009? One thing is certain, the next movements will be upwards.

But this will be the last thing on the minds of those fighting to get their hands on a free car - many of whom will not have even been considering buying one until they heard about this deal. Insurance, road tax, and licensing are not included, all of which will have to be paid when you get your shiny new Rover.

Don't get me wrong, West Brom's deal may be just what you are looking for - especially if you were about to buy a new car anyway. But do the maths before rushing in.

Fresh hopes for Equitable Lifers

Ruth Kelly's climb-down over Equitable Life this week will not be the last time she is humiliated on this case. Her admission that it will be possible to let the Parliamentary Ombudsman investigate the Government Actuary Department's involvement in the affair is certain to lead to further embarrassment for the Treasury.

Lord Penrose's report pinpointed the GAD as being at the heart of the regulatory failings which let the crisis at Equitable happen. Assuming that the Ombudsman, Ann Abraham, reopens her inquiry, which looks extremely likely, she will have to be blind or gagged to find no fault with the GAD and the Government as a whole. There is now a great hope that the Government will eventually be cornered into paying compensation to Equitable's long-suffering policyholders.

A body blow to the caring society

The news that long-term care insurance is to disappear withoutmaking it to old age itself is no great surprise. People don't like facing up to the fact that there's a good chance that they may end up in a care home. When you've got full use of your limbs and faculties, the idea seems far too horrible to bear thinking about.

But the Government should be concerned. People are not saving enough for their retirement, and in the future many will be forced to use the equity in their homes to supplement their pensions - a practice which is still relatively rare these days. For now, most people hang on to their homes, either to pass on to their relatives, or to pay for care fees if the need arises.

So in 50 years' time, when everyone is retiring on the capital in their property, where will the money come from to pay for those who need to go into care? One thing's for sure - the Government won't be able to afford it. And people won't be able to insure themselves against the potential liability, because long-term care insurance won't exist.

Already, the Government is running into serious problems trying to fund the growing number of care-home residents who don't have adequate resources. Very soon, this will become a problem which the Government will no longer be able to ignore.

j.daley@independent.co.uk

Arts and Entertainment
books
Voices
Caustic she may be, but Joan Rivers is a feminist hero, whether she likes it or not
voicesShe's an inspiration, whether she likes it or not, says Ellen E Jones
Arts and Entertainment
The Doctor and the Dalek meet
tvReview: Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Sport
Diego Costa
footballEverton 3 Chelsea 6: Diego Costa double has manager purring
PROMOTED VIDEO
Life and Style
3D printed bump keys can access almost any lock
techSoftware needs photo of lock and not much more
Arts and Entertainment
The 'three chords and the truth gal' performing at the Cornbury Music Festival, Oxford, earlier this summer
music... so how did she become country music's hottest new star?
Life and Style
The spy mistress-general: A lecturer in nutritional therapy in her modern life, Heather Rosa favours a Byzantine look topped off with a squid and a schooner
fashionEurope's biggest steampunk convention heads to Lincoln
News
Dr Alice Roberts in front of a
peopleAlice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
News
i100
Arts and Entertainment
Star turns: Montacute House
tv
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Arts and Entertainment
Unsettling perspective: Iraq gave Turner a subject and a voice (stock photo)
booksBrian Turner's new book goes back to the bloody battles he fought in Iraq
News
The Digicub app, for young fans
advertisingNSPCC 'extremely concerned'
News
i100
Arts and Entertainment
Some of the key words and phrases to remember
booksA user's guide to weasel words
Finacial products from our partners
Property search
Latest stories from i100
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

    Law Costs

    Highly Attractive Salary: Austen Lloyd: BRISTOL - This is a very unusual law c...

    Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

    £35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

    DevOps Engineer (Systems Administration, Linux, Shell, Bash)

    £50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

    Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

    £60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

    Day In a Page

    The other Mugabe who is lining up for the Zimbabwean presidency

    The other Mugabe who is lining up for the Zimbabwean presidency

    Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
    The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

    The model for a gadget launch

    Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
    Alice Roberts: She's done pretty well, for a boffin without a beard

    She's done pretty well, for a boffin without a beard

    Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
    Get well soon, Joan Rivers - an inspiration, whether she likes it or not

    Get well soon, Joan Rivers

    She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
    Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

    A fresh take on an old foe

    Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
    Fashion walks away from the celebrity runway show

    Fashion walks away from the celebrity runway show

    As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
    Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

    Meet the stars of TV's Wolf Hall...

    ... and it's not the cast of the Tudor trilogy
    Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

    Europe's biggest steampunk convention

    Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
    Don't swallow the tripe – a user's guide to weasel words

    Don't swallow the tripe – a user's guide to weasel words

    Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
    Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

    Daddy, who was Richard Attenborough?

    The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor
    She's dark, sarcastic, and bashes life in Nowheresville ... so how did Kacey Musgraves become country music's hottest new star?

    Kacey Musgraves: Nashville's hottest new star

    The singer has two Grammys for her first album under her belt and her celebrity fans include Willie Nelson, Ryan Adams and Katy Perry
    American soldier-poet Brian Turner reveals the enduring turmoil that inspired his memoir

    Soldier-poet Brian Turner on his new memoir

    James Kidd meets the prize-winning writer, whose new memoir takes him back to the bloody battles he fought in Iraq
    Aston Villa vs Hull match preview: Villa were not surprised that Ron Vlaar was a World Cup star

    Villa were not surprised that Vlaar was a World Cup star

    Andi Weimann reveals just how good his Dutch teammate really is
    Bill Granger recipes: Our chef ekes out his holiday in Italy with divine, simple salads

    Bill Granger's simple Italian salads

    Our chef presents his own version of Italian dishes, taking in the flavours and produce that inspired him while he was in the country
    The Last Word: Tumbleweed through deserted stands and suites at Wembley

    The Last Word: Tumbleweed through deserted stands and suites at Wembley

    If supporters begin to close bank accounts, switch broadband suppliers or shun satellite sales, their voices will be heard. It’s time for revolution