Over the wire

The hassle-free way to arrange a mortgage is over the telephone, writes Gill Brown
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The Independent Online
The thought of moving house filled Sandi Jones with dread. It wasn't the upheaval she minded, so much as the time spent on legal and financial arrangements.

"The last time, it took me hours to work out which mortgage deal was the best," she says, "and then I seemed to be on the phone to the solicitor and the building society every five minutes; there were days when I could hardly get any work done."

For a 33-year-old high-flyer in the computer industry, that was definitely a no-no, and when she moved to London after three years in the West Country, she vowed that this time would be different: "I found the flat I wanted on the Friday morning, made an offer in the afternoon and the agent phoned me as I was on the train heading back to Bristol to say that it was acceptable.

"There was no way I could face all that trekking round the banks and building societies - so I decided to do it by phone, and by lunchtime on Monday it was all sorted out. It was all very easy and there was no complicated maths involved."

Ms Jones tried three telephone-based mortgage lenders: Bank of Scotland, First Mortgage and Direct Line. Bank of Scotland Mortgages Direct offers a range of different mortgage packages, including a "personal choice" package (6.99 per cent variable rate) with high flexibility. For example, you can budget for holidays by spreading the annual cost over 10 payments rather than 12 - take a "payment holiday" of up to six months.

This was a feature which immediately attracted Ms Jones - and she thought it would appeal to many more people working in roller-coaster industries such as IT.

Direct Line, which in its first 10 years grew to become Britain's biggest motor insurer, has an increasing share of the home loans market, writing mortgages worth pounds 550m in its first two years. It sells only a standard variable-rate loan mortgage, with a current rate of 6.05 per cent, which it describes as a "straightforward, good value product".

It is available only on a capital and interest repayment basis, although you can transfer endowment mortgages and borrow up to the amount of the endowment on interest only. Any additional borrowing will be repayable by instalments of capital and interest.

Some lenders offer lower, fixed-rate products, but Jim Stewart, managing director of Direct Line Financial Services, says that customers should look at overall value rather than just the "headline" rate.

"We follow the strictest principles of good practice," he says. "There are no `hidden nasties' such as redemption penalties and fees, no compulsory additional purchases ..."

First Mortgage, unusually for a direct seller, offers not only its own products but also other lenders' - so borrowers can make comparisons in a single phone call.

"If you start looking at fixed-rate deals, cashbacks and the rest, the arithmetic is a bit more complicated than you might think," says the managing director, Nick Deutsch. "For example, some cashback offers can be worth up to 6 per cent of the value of your mortgage, which sounds pretty good until you work out that some fixed-rate deals can be worth up to 8 per cent off the total."

Many other direct sellers of mortgages are divisions of high street lenders, such as Woolwich Direct, which currently offers interest-only mortgages. An endowment or PEP is needed to provide the capital repayment - at 3.99 per cent variable rate.

But the real challenge is coming from a new entrant to the business: Prudential, which currently arranges endowments worth pounds 700m a year to support mortgages from other lenders, and pays out more than pounds 1bn a year in maturing endowments. Says Jim Sutcliffe, chief executive of Prudential UK."We are can offer good value mortgages and savings accounts ... supported by the security of Prudential's size and capital base".

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