Personal Finance: Already too well endowed

THE cosy pairing between building societies and insurance companies that rode the housing boom, and the bonanza of endowment policy sales that flowed from it, should be coming to an end.

Apart from the dismal property market, the public has woken up to the perils of the endowment policy. They are expensive and inflexible.

Anyone trying to unwind a shotgun joint mortgage taken out to beat the Lawson ban on double tax relief, for instance, will have realised that they cannot simply be sliced in half. And just abandoning them is like stuffing pounds 10 notes through the grating of the drain.

More and more mortgages are being sold as simple loans, so buyers can choose a repayment where the capital is paid off gradually throughout the loan, or fix up their own savings scheme to provide a lump sum to repay the debt at the end.

Lenders used to insist on endowments or pensions to back fixed-rate loans, but they are now being forced to take a more open attitude.

Competition is tough, and borrowers have the upper hand with mortgage lenders and can call the shots.

The days of mortgage queues are long gone. And the lenders are fighting for the thin business around.

Savers are suffering because building societies do not need to offer keen rates - there is no point paying dearly to entice money through the doors if they have no one who wants to borrow it.

Building societies are in danger of living in the past. As their agreements with life companies come to the end of the first phase, they are pouring their energies into setting up their own.

Last week, Nationwide, the second largest society, hinted that it was to end its tie with GRE and go it alone.

If only it was possible to believe that would improve on the choice, structure and selling of what is already around, it would be a welcome development. But in the past, societies have largely followed the well-trodden path and pumped out endowment policies to impressionable first-time buyers.

Some societies, such as National & Provincial, Woolwich and Britannia, have developed unit trusts, which offer pure investment - and an easy exit.

But others do not appear to have noticed the changes that have been taking place.

Cheltenham & Gloucester has dropped the investment business altogether. Its rivals claimed it was not giving up much, as such a large proportion of its business came through advisers who creamed off the commission anyway. But from the home- buyer's point of view, it really does not matter.

It's the end deal that counts. Nationwide should tread carefully before repeating the mistakes of the past.

DON'T be fooled by the publicity given last week to Midland and NatWest banks' decision to credit customers' accounts with cheques after two days.

Look carefully. It will still take three days before you can take your money out.

It is probably no coincidence that the 24-hour reduction in the time taken for customers to benefit from cheques paid into their accounts came in the same week that Nigel Griffiths, Labour's consumer affairs spokesman, accused the banks of 'deceitful tactics' over cheque clearance.

A two-day cycle means that if a cheque is paid in on Monday morning, it will be credited on Wednesday - but the cash cannot be withdrawn until Thursday afternoon.

Lloyds pays interest from the Thursday, and allows the money to be withdrawn on the same day. It claims the extra day's interest on pounds 100 is just 0.05p, and a spit in the ocean compared with the whole banking deal.

That may be so, but it's better than not having it. If only the banks would attempt to be more open about what they are up to, it wouldn't be so bad.

peopleFrankie Boyle responds to referendum result in characteristically offensive style
Arts and Entertainment
Highs and lows of the cast's careers since 2004
New Articles
i100... with this review
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Senior BA - Motor and Home Insurance

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Market Risk & Control Manager

Up to £100k or £450p/d: Saxton Leigh: My client is a leading commodities tradi...

SQL Developer - Watford/NW London - £320 - £330 p/d - 6 months

£320 - £330 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Head of Audit

To £75,000 + Pension + Benefits + Bonus: Saxton Leigh: My client is looking f...

Day In a Page

Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam