April fools for 1.60 pounds

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The Independent Online
OFFICIALLY, mortgage tax relief will be reduced from 25 to 20 per cent on the first pounds 30,000 of qualifying loans on 5 April. But for a number of borrowers the new tax year will come early.

Many building societies operate their mortgage computers on a monthly basis, so the change to lower tax relief will take effect on 1 April.

This will make a difference of about pounds 1.60. It may not be a large sum. But it is the principle of the matter. 'Give me back my five days,' will be the cry from borrowers. If borrowers cannot persuade lenders to adjust their systems to relinquish the pounds 1.60, they can write to the Inland Revenue - Claims Branch (savings & investments), St John's House, Merton Road, Bootle, Merseyside L69 9BB - to get back the overpayment.

The treatment varies between lenders. The Halifax, will not be doing anything to help borrowers get their pounds 1.60. Nationwide expects to hold on to the money until the end of the year when it will recalculate outstanding mortgages to take account of this overpayment.

Abbey National is readjusting its systems so that those whose payments fall after the fifth of the month will pay a modified amount to take account of the different rates during the month. However, those with payment dates at the begining of the month will see the adjustment in May.

It may all seem a terrible fuss over pounds 1.60. But with nearly seven million borrowers that means pounds 11.2m floating around between borrowers, lenders and the Inland Revenue.

You cannot blame people for wanting their little bit. It is an interesting test to see which lenders have the capability and will-power to cope with this hiccup.

Lenders whose computers are not programmed to turn somersaults are going to have some explaining to do - or they could at least offer a sweetener.

PEPS fervour is at its height as the time ticks away to the deadline for the current financial year. But beware; because of Good Friday and Easter Monday, postal delays, and cooling-off periods the actual deadline is only about two weeks away.

Since PEPs were introduced in the 1986 Budget, any couple (couples make double numbers and therefore look more impressive than individuals) investing the full allowance and keeping pace with the FT-SE All Share index would now have a portfolio worth pounds 159,633.

Assuming modest growth of 8.5 per cent and pounds 18,000 being added each year, the first PEP millionaire couples would emerge in 15 years' time.

But investment is not like that, and there may even be people out there with a certain flair who are already nearing the half-million mark.

If anyone wishes to boast about their prowess, I would be happy to hand out the plaudits.

IS THE panic over rising fixed mortgage rates over?

Woolwich Building Society cut its fixed rates on Friday after money market rates eased.

Its five-year fix came down from 7.65 per cent to 7.45 per cent. This rate is still above several in the market - for example, Alliance & Leicester has a five-year fix at 7.19 per cent. But there is nothing like a change of direction for changing sentiment.

The flurry a fortnight ago could well turn out to be a blip on the route to lower interest rates - even though the trend is still likely to be up.

So don't dismiss fixed rates, but don't rush.