Cars the latest perk in the fight for home loans

THE MORTGAGE BUSINESS, owned by the Bank of Scotland and National Counties Building Society, stirred up the mortgage war last week by offering a new type of gimmick - a car instead of a cashback or interest rate discount.

TMB claims to have received 500 inquiries already in response to its offer of the use of a Renault Clio - taxed, insured and serviced for 12 months - to anyone who takes out a mortgage or remortgage of at least pounds 45,000. TMB's standard variable rate is 8.29 per cent, and it also offers a pounds 250 cashback to help with mortgage fees.

But there is a completion fee of pounds 299 in addition to survey and legal fees, and borrowers will be charged a substantial penalty - four months' gross interest - if they redeem within four years, and one month's interest after that.

Chase de Vere and National Counties Building Society also claim to have had a good response to their offer of a free Mini, worth pounds 6,381 on the road, for borrowers who remortgage with them for at least pounds 100,000. The current mortgage rate is 8.39 per cent, but there is a five-year penalty "tail" on the offer. If it is paid off in full or in part within that time, a fee equal to 6 per cent of the loan will be required.

The car's invoice value could also be liable to capital gains tax if other gains are made during the year. The offers have been criticised by consumer lobbies, increasingly worried at the impact of cashback and discount offers on the mortgage lending business.

Most offers now represent between 3 and 6 per cent off the value off a loan and subsidised loans must be averaging at least 10-15 per cent of the value of most lenders' loan portfolios. Although most mortgage lenders have made good margins on mortgage business in the past, the volume of business is little more than half the peak levels in the late 1980s. The upturn in house repossessions in the first half of 1995 and the sharp downward revision in house price forecasts from analysts at UBS this week add to the generally gloomy outlook. They now expect a 3 per cent average drop in prices.

Business could grow in the next two months, as buyers rush through deals to beat the deadline of 1 October, after which borrowers taking out new mortgages and remortages will have to wait nine months for income support to start paying their mortgage interest.

But any artificial surge in business will be balanced by a likely drop in demand for mortgages after the deadline has passed.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project