Free-car mortgage offers hit the skids

NIC CICUTTI

Free car mortgages, heavily touted as the collective answer to the crisis facing both the car industry and the housing market, appear to have driven into the sand.

Two mortgage lenders offering either a "free" Renault Clio, a Mini or a Rover to those taking out a loan, admitted yesterday that the total take-up on their deal ran to barely 50 applications so far.

They claimed to be "reasonably" satisfied with the scale of mortgage deals in the pipeline.

But Ian Darby, marketing director at John Charcol, the UK's largest mortgage broker, said: "It does look as if this particular mortgage vehicle has stalled. It was a smart marketing move. However, tying yourself to one lender's variable rate for seven years, even if it is a good one, may not make sense in cases where excellent discounts are available elsewhere."

So-called "free-car loans" received widespread publicity when they were launched last month. One, available through Chase de Vere, a firm of mortgage brokers, offers a Mini on mortgages of over pounds 100,000 taken out through National Counties Building Society. The Rover 800 Coupe is available for loans over pounds 400,000.

Simon Tyler, sales director at Chase de Vere, said his company was processing several dozen applications at present, with the average size of loan running at pounds 170,000.

"We would not claim to have been inundated by applications, but I am not totally unhappy with the number we are dealing with," he said yesterday.

"We have always maintained that this was a suitable mortgage for some borrowers but not everyone. It would be suitable, for instance, for business people who were able to give up a company car and take a pay rise in its place."

Tim Cadel, marketing manager at National Counties, said his society had set aside pounds 10m for this type of mortgage. So far, less than half of it appears to be spoken for. "We are reasonably pleased with the amout of business we are receiving so far," Mr Cadel said.

The Mortgage Business, a centralised lender, offers a Renault Clio for one year, including road tax, insurance and a free service, on loans over pounds 45,000.

After the one-year period, the Clio can be bought at a trade price. TMB's variable interest rate stands at 8.29 per cent, slightly lower than many other lenders. Colin Snowdon, general manager at TMB, said: "We are very pleased with what we have achieved so far. Since our launch a month ago, we have received thousands of inquiries and sent out hundreds of application forms."