Home loans released from the restricting mire of Miras

The scrapping of Miras could eventually lead to cheaper and more flexible mortgages becoming available to borrowers.

THE DEMISE of Miras may add around pounds 200 a year to the cost of most homeloans, but its death knell may save borrowers a small fortune in the long run.

The Government's decision to scrap of tax relief on mortgages has removed any incentive for maintaining a home loan. Every logic now dictates that borrowers repay their debt as fast as possible. But they will need a quite different breed of mortgage to do so.

For example, borrowers with a pounds 90,000 loan at current rates could cut their interest bill by nearly a third, pounds 25,117 , by overpaying just pounds 100 a month. Overpay by pounds 200, and the debt is settled in 14 years with the interest bill halved. Over a period of 25-years, Miras only saved them about pounds 5,000.

Borrowers were already demanding more flexible loan packages and axing Miras will accelerate this trend. It will also free lenders to be much more innovative, by releasing them from the strait-jacket of onerous Inland Revenue regulations which the tax break brought with it.

Britain's biggest lenders are already busy with plans on their drawing boards, but Nationwide stole the march on its competitors this week with its new Euro mortgage.

And this is just the beginning. Other lenders are studying mortgage accounts which mix-and-match bank accounts, credit cards and savings accounts. Some are considering risk-rating not people but properties, and we could even see the arrival of Japanese-style inter-generational loans.

Banks and building societies are celebrating the end of Miras as a big breakthrough. For example, it often makes the greatest sense for borrowers to build up a portfolio of different kinds of loans. Fixing may get you the cheapest rate, but prevents you repaying early.

Splitting the balance between a fix and a variable rate can get around the problem. But the Miras men didn't like that, so lenders fought shy of such arrangements, unless you insisted.

If you wanted to borrow more than pounds 300 for anything another than a home loan, even an arrangement fee... the Miras men didn't like that either. It had to be done through a separate account, which confused borrowers and created labyrinthine administration problems. So again, lenders tended to give hybrid loans a wide berth.

Worse still were the regular spot checks by the Inland Revenue to ensure all the required paperwork was correct. Despite their best efforts, almost every lender in the land was fined at some stage, and forced to review all its Miras documentation; a hugely costly exercise that wasted time and money.

This all conspired to encourage banks and building societies to stick rigidly to the simple, but inflexible formula of the 25-year loans, where interest was calculated once a year.

Abbey National's head of mortgages Margaret Schwarz says: "There are a lot of things that we do today which we are doing because that's the way we always did them. But times change. One size won't fit all any more. People want quite different things from their mortgage, and our challenge is to meet all of those diverse demands."

She believes that the mortgage account will become just another loan, with borrowers packaging all their debt together under the one umbrella, as is now available in the Virgin One Account.

But running such an account was problematic under the Miras regime. Legal & General was forced to introduce a rule which said that no borrower could reduce debt below pounds 30,000 when it launched its flexible loan four years ago, to get round the problem.

Alliance & Leicester's mortgage chief, Jeff Sutherland-Kay, agrees with Ms Schwarz. He says: "Middle England is crying out for greater flexibility. We are going to see many more mortgage accounts which roll the current account, credit cards and overdraft facilities into one."

However, mortgage broker Ian Darby at John Charcol is sceptical about any all-eggs-in-one-basket approach, and points out that the Virgin loan is not particularly competitively priced, charging between 6.6 per cent and 7.45 per cent.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
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

SThree: HR Benefits Manager

£40000 - £50000 per annum + pro rata: SThree: SThree Group have been well esta...

Recruitment Genius: Office Manager / Financial Services

£30000 - £37000 per annum: Recruitment Genius: Established in 1999, a highly r...

Jemma Gent: Year End Accountant

£250-£300 Day Rate: Jemma Gent: Are you a qualified accountant with strong exp...

Jemma Gent: Management Accountant

£230 - £260 Day Rate: Jemma Gent: Do you want to stamp your footprint in histo...

Day In a Page

HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower