Personal finance: How the new home-loan schemes compare

The acid test of any new financial product is how it fits in with real human needs. That is why we have tested some of today's new "flexible mortgages" on Marianne Jones, 32, a typical reader of The Independent.

Marianne, who is an assistant features editor at Marie Claire, says: "I've always joined any pension scheme available. But beyond that, my approach to money isn't very organised.

"Of course, I'd be interested in finding ways of reducing the cost of borrowing, and having as much control as possible over my finances. On the other hand, I like the discipline of a repayment mortgage, where I can see the amount owed go down each month."

Marianne has a repayment mortgage of pounds 90,000 with First Direct, the telephone bank, which is discounted by 2 per cent from its current variable rate of 8.2 per cent for the first three years, on which she would pay pounds 8,120 a year at the full rate, which includes compulsory insurances. She also has a Visa credit card.

While she would currently face hefty penalties for redeeming her mortgage early, what might she hypothetically save (or pay) compared with First Direct's standard variable rate? We have chosen four typical flexible loans to find out.

Sainsbury's Options:

With a variable rate of 7.9 per cent, this mortgage would save Marianne 0.3 per cent on her monthly interest payments. A cheque book and drawdown facility are available. The pounds 6,000 she holds on deposit to offset future tax bills presently earns pounds 180 net of tax. Using this to reduce her loan would save pounds 414 in interest payments. But she would then have to take the money out again to pay her tax.

Annual mortgage payments are pounds 6,499.50 - a saving of pounds 1,620 a year, plus the pounds 414.

Mortgage Express's Choices: This mortgage would let Marianne borrow up to 105 per cent of the value of her flat, at a current variable rate of 8.75 per cent, just over half a percent to the cost of her First Direct loan. But she doesn't need the money. Again, she could use cash to reduce her borrowing, but draw on it again if needed.

On the pounds 90,000 mortgage, her annual cost would be pounds 7,481 per year, a saving of pounds 639 a year, plus the saving from interest.

Clydesdale Bank's Flexible Repayment Mortgage:

With a variable rate of 8.7 per cent this is expensive, but strangely still cheaper than First Direct's 8.2 per cent. It allows small lump sum repayments, calculating interest daily, but offers no drawdown facility.

Annual payments would be pounds 7,106, a saving of pounds 1,014 a year.

Virgin's One Mortgage:

A stepped interest rate starts at 8.1 per cent but goes up to 8.95 per cent for loans on a loan-to-value of 90 per cent or above. Marianne would pay 8.55 per cent based on the current value of her flat.

She could throw away her Visa card and borrow for consumer spending at a very competitive rate. Virgin also throws in free colour photographs of Richard Branson, so who can complain. But she always pays off her bills before the interest-free period is up.

The annual cost is pounds 7,310, a saving of pounds 810 a year, plus the interest "earned/saved" from her pounds 6,000 on deposit.

In every case, she would have to take out separate home and contents insurance. But it is unlikely that the cost of this would cancel out the savings from these mortgages.

Start your day with The Independent, sign up for daily news emails
ebookA unique anthology of reporting and analysis of a crucial period of history
Arts and Entertainment
Reimagined: Gwyneth Paltrow and Toni Collette in the film adaptation of Jane Austen's Emma
Arts and Entertainment
Jesuthasan Antonythasan as Dheepan
Cannes 2015Dheepan, film review
Richard Blair is concerned the trenches are falling into disrepair
newsGeorge Orwell's son wants to save war site that inspired book
Arts and Entertainment
The pair in their heyday in 1967
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

Guru Careers: Software Developer / C# Developer

£40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

Neil Pavier: Management Accountant

£45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

Sheridan Maine: Commercial Accountant

£45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

Laura Norton: Project Accountant

£50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

Day In a Page

Abuse - and the hell that came afterwards

Abuse - and the hell that follows

James Rhodes on the extraordinary legal battle to publish his memoir
Why we need a 'tranquility map' of England, according to campaigners

It's oh so quiet!

The case for a 'tranquility map' of England
'Timeless fashion': It may be a paradox, but the industry loves it

'Timeless fashion'

It may be a paradox, but the industry loves it
If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

Could have done with Osama bin Laden staying alive?

Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
New exhibition celebrates the evolution of swimwear

Evolution of swimwear

From bathing dresses in the twenties to modern bikinis
Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

Sun, sex and an anthropological study

One academic’s summer of hell in Magaluf
From Shakespeare to Rising Damp... to Vicious

Frances de la Tour's 50-year triumph

'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
'That Whitsun, I was late getting away...'

Ian McMillan on the Whitsun Weddings

This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
Kathryn Williams explores the works and influences of Sylvia Plath in a new light

Songs from the bell jar

Kathryn Williams explores the works and influences of Sylvia Plath
How one man's day in high heels showed him that Cannes must change its 'no flats' policy

One man's day in high heels

...showed him that Cannes must change its 'flats' policy
Is a quiet crusade to reform executive pay bearing fruit?

Is a quiet crusade to reform executive pay bearing fruit?

Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
The King David Hotel gives precious work to Palestinians - unless peace talks are on

King David Hotel: Palestinians not included

The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
More people moving from Australia to New Zealand than in the other direction for first time in 24 years

End of the Aussie brain drain

More people moving from Australia to New Zealand than in the other direction for first time in 24 years
Meditation is touted as a cure for mental instability but can it actually be bad for you?

Can meditation be bad for you?

Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

Australia's first-ever Eurovision entrant

Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine