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
PROMOTED VIDEO
News
Starting the day with a three-egg omelette could make people more charitable, according to new research
science
News
Top Gun actor Val Kilmer lost his small claims court battle in Van Nuys with the landlord of his Malibu mansion to get back his deposit after wallpapering over the kitchen cabinets
people
News
Comedian Ted Robbins collapsed on stage during a performance of Phoenix Nights Live at Manchester Arena (Rex)
people
News
The actress Geraldine McEwan was perhaps best known for playing Agatha Christie's detective, Miss Marple (Rex)
peopleShe won a Bafta in 1991 for her role in Oranges Are Not The Only Fruit
News
newsPatrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
News
Robert Fraser, aka Groovy Bob
peopleA new show honours Robert Fraser, one of the era's forgotten players
Life and Style
Torsten Sherwood's Noook is a simple construction toy for creating mini-architecture
tech
Sport
David Silva celebrates with Sergio Aguero after equalising against Chelsea
footballChelsea 1 Manchester City 1
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

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

As in 1942, Germany must show restraint over Greece

As in 1942, Germany must show restraint over Greece

Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
Britain's widening poverty gap should be causing outrage at the start of the election campaign

The short stroll that should be our walk of shame

Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

Homeless Veterans appeal

The rise of the working poor: when having a job cannot prevent poverty
Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

Prince Charles the saviour of the nation?

A new book highlights concerns about how political he will be when he eventually becomes king
How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

How books can defeat Isis

Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
Judith Hackitt: The myths of elf 'n' safety

Judith Hackitt: The myths of elf 'n' safety

She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
The open loathing between Barack Obama and Benjamin Netanyahu just got worse

The open loathing between Obama and Netanyahu just got worse

The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
French chefs get 'le huff' as nation slips down global cuisine rankings

French chefs get 'le huff' as nation slips down global cuisine rankings

Fury at British best restaurants survey sees French magazine produce a rival list
Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

Young carers to make dance debut

What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

Design Council's 70th anniversary

Four of the most intriguing prototypes from Ones to Watch
Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

Dame Harriet Walter interview

The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
Art should not be a slave to the ideas driving it

Art should not be a slave to the ideas driving it

Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
Bill Granger recipes: Our chef's winter salads will make you feel energised through February

Bill Granger's winter salads

Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
England vs Wales: Cool head George Ford ready to put out dragon fire

George Ford: Cool head ready to put out dragon fire

No 10’s calmness under pressure will be key for England in Cardiff
Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

Michael Calvin's Last Word

Time for Old Firm to put aside bigotry and forge new links