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.