Bandwagon mortgages

What is the point of having a 25-year mortgage? None at all. If you can afford it, you should pay it off much more quickly. Chucking extra cash at your mortgage is a highly efficient way to make use of some savings - especially if you can borrow some of the cash back from the mortgage lender later: to buy a car, for example, or pay off your credit cards.

After all, mortgage interest is charged at less than 7 per cent a year (unless you are stuck in a fixed-rate deal). Even cheap personal loans are about double that, and credit card interest is mostly still charged at around 20 per cent.

The problem with traditional mortgages is that they are set up to extract the maximum possible interest and hidden charges from us, the punters, over the longest possible time. Deviation is discouraged. An enterprising reader recently spent an afternoon trying to get his local bank branch to accept a pounds 500 cheque as an overpayment on his mortgage. No one wanted his cash, and only after lengthy consultations with head office was he allowed to come back at a later date and make the deposit.

So the banks and building societies have got fat by offering us deals filled with evil small print and hidden rip-offs. But the success of Standard Life Bank's new, flexible mortgage operation goes to show how quickly the public will react when it is offered something better. The bank first offered loans in January but is confident it will have a 15 per cent share of the new lending market in the UK by the end of the year. Why has it been so successful? Well, it spends a load of cash on ads. But so do many of the traditional lenders to be found on a high street near you. More importantly, Standard Life Bank offers a fair contract at competitive rates - the main ingredients of a truly flexible deal.

Many of the early flexible loans had a slow start, when many pontificators said they wouldn't take off. But now you can almost smell the fear in high-street banks' marketing departments as the bosses demand that a flexible package is rushed out.

Lo and behold, Halifax last week launched its Extra Choice range. As the deliciously opinionated statisticians at Moneyfacts point out in their comparison, a basic ingredient of the flexible mortgage should be daily calculation of interest. Yet Halifax is charging its flexible deal on an annual basis. So any overpayment you make won't register for months. And the loan doesn't allow you to make any lump sum withdrawals within the first year. As Moneyfacts says, "hardly flexible".