Quick variations on the BES loan-back theme: Building societies have added more get-out options to new schemes, writes Neasa MacErlean

NEXT week at least six building societies will be asking investors to back Business Expansion Scheme issues to buy up their repossessed properties. They are likely to be met with substantial demand. The BES market is changing so rapidly that schemes that looked attractive when they were announced can look passe two days later.

Bristol & West's Bessa was hailed as an ingenious breakthrough when it was launched two weeks ago with a six-month get- out. But it is only now reaching its pounds 45m target. Two weeks is a long time in the current BES world.

The Bristol & West scheme is now regarded as outdated compared with newer launches that allow investors to bail out at one, two or three years as well as the six-month option.

The two main sponsors of BES schemes have opposing views of the development of the market. Close Brothers, sponsor of the Bristol & West scheme, believes most investors want to take out their funds after six months through the new 'loan-back' schemes. On its newest BES scheme - providing accommodation for students at Newnham College, Cambridge - it has arranged a 75p loan-back after six months for each gross pounds 1 invested.

Combined with the 40p tax refund for higher-rate taxpayers, the annualised return is slightly more than 32 per cent. (None of these schemes are suitable for 25 per cent taxpayers, who would earn far better rates elsewhere.)

The offer of a 75p return is competitive. However, this is bettered by a Corpus Christi BES issue, which plans a 76p six-month loan-back.

Johnson Fry, Close Brothers' main competitor, is taking a different tack. It is only offering a 74p six-month loan-back, on the assumption that investors will exercise their exit options at a later date. It is 'advising investors to consider not taking the six-month loan unless they need to take their profit as soon as possible'.

Johnson Fry is sponsoring BES issues from Portman, Leeds Permanent and National & Provincial building societies next week. It is also arranging for the surplus demand of pounds 19m on the recent Bradford & Bingley issue to be taken up by Leeds & Holbeck and Norwich & Peterborough. The minimum investment is pounds 3,000.

All these schemes will offer loan-backs of 78.31p after a year, 87.71p after two years and 98.24p after three years. Investors who take out a loan-back option will still be eligible for a 50 per cent share in any profits the schemes earn above pounds 1.23 per share over the full five-year BES period.

Britannia Building Society's similar pounds 50m scheme offers 75 per cent of the excess profits to investors.

The Johnson Fry philosophy assumes that the Chancellor, Norman Lamont, will not decide to forbid the exercise of the loan- back option after the BES regime finishes at the end of the year. The Close Brothers approach could cope with such a change.

Allenbridge Group, a BES adviser, is enthusiastic about the new building society deals with a range of loan-back options. If the Chancellor does not alter the BES rules in the Budget, investors will probably want to exercise their loan-back options in six months and then reinvest in a fuller-term BES issue. But the multi-option schemes cater for the possibility of a changed market in six months' time.

Next week many BES investors may be attracted to the National Westminster pounds 25m issue to buy the homes of NatWest staff who have to relocate. This scheme offers a 74p loan-back after six months or a pounds 1.08 guaranteed return in five years' time.

By contrast, Lloyds Bank is backing a Barratt Homes BES issue renting out new properties. It offers a pounds 1.15 return in five years.

FootballGerman sparks three goals in four minutes at favourite No 10 role
Rumer was diagnosed with bipolarity, attention deficit hyperactivity disorder and post-traumatic stress disorder: 'I was convinced it was a misdiagnosis'
peopleHer debut album caused her post-traumatic stress - how will she cope as she releases her third record?
A long jumper competes in the 80-to-84-year-old age division at the 2007 World Masters Championships
Have you tried new the Independent Digital Edition apps?
Radamel Falcao was forced to withdraw from the World Cup after undergoing surgery
premier leagueExclusive: Reds have agreement with Monaco
Arts and Entertainment
'New Tricks' star Dennis Waterman is departing from the show after he completes filming on two more episodes
tvHe is only remaining member of original cast
Life and Style
Walking tall: unlike some, Donatella Versace showed a strong and vibrant collection
fashionAlexander Fury on the staid Italian clothing industry
Arts and Entertainment
Gregory Porter learnt about his father’s voice at his funeral
Arts and Entertainment
tvHighs and lows of the cast's careers since 2004
Life and Style
Children at the Leytonstone branch of the Homeless Children's Aid and Adoption Society tuck into their harvest festival gifts, in October 1936
food + drinkThe harvest festival is back, but forget cans of tuna and packets of instant mash
Lewis Hamilton will start the Singapore Grand Prix from pole, with Nico Rosberg second and Daniel Ricciardo third
F1... for floodlit Singapore Grand Prix
New Articles
Life and Style
Couples have been having sex less in 2014, according to a new survey
Finacial products from our partners
Property search

Scottish independence: How will kilt-edged stocks fare?

Scottish companies were caned when the separatists surged in the polls. Is this the future, asks Simon Read, and would they be any better together?

Two million first-time buyers are locked out

The drought in lending to people with low deposits has created legions of frustrated buyers, writes Emma Lunn

Leaving money to charity in your will could help reduce the tax bill for your loved ones

Next week has been designated "remember a charity in your will week", to put the focus squarely on the subject
Money is slipping through our fingers: the UK is falling behind other countries in the amount we put away

How to save money: UK is crashing down the European league table for putting money away

The UK has slipped to 11th in the latest European league table of savers. Rob Griffin checks out the best options

Energy firms found guilty of bad practice could have licences revoked under Labour government

Caroline Flint, the shadow energy secretary, says a Labour government would create a new energy regulator

A student's guide to financial survival: You don't have to drown in debt at university

Fresh from A-level delight, the moment does not have to be soured by students resigning themselves to thousands of pounds worth of debt in three years' time. Rob Griffin sees how to pass the university challenge

'Dismal' eurozone data sparks concerns

European Central Bank chief Mario Draghi is under pressure to launch promised stimulus before the EU slides further
Love but not marriage: property is one area where cohabiting couples are in danger of losing out

How couples can protect their financial interests when cohabiting

People who simply live together cannot assume they have the same rights to each other's assets as spouses or civil partners. Michelle McGagh sees how they can protect their financial interests
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Senior BA - Motor and Home Insurance

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Market Risk & Control Manager

    Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

    SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

    £320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Head of Audit

    To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

    Day In a Page

    Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

    Despite the result, this is the end of the status quo

    Boyd Tonkin on the fall-out from the Scottish referendum
    Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

    Manolo Blahnik: Flats, Englishness, and Mary Beard

    The shoe designer who has been dubbed 'the patron saint of the stiletto'
    The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

    Scrambled eggs and LSD

    Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
    'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

    'Normcore': Blending in is the new standing out

    Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
    Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

    New leading ladies of dance fight back

    How female vocalists are now writing their own hits
    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam