Personal Finance: Tailor-made home deals

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The Independent Online
THE idea of a standard mortgage rate for all borrowers is on the wane and may soon be dead.

Larger loans already bring a lower rate, and the best deals are only on offer to those with larger deposits.

But things are set to go much, much further. The Skipton Building Society is already giving a 0.15 per cent discount (well, every little bit helps) to borrowers who have a clean credit history, have been in continuous employment for 12 months, and are borrowing no more than twice a couple's joint income.

Other building societies are looking hard at ways to predict those who will be good payers and entice them aboard with keenly priced deals. Of course, those with a blemish on their credit record will find it more and more difficult to get a mortgage.

It will be much less socially acceptable to dip into the statistics and divide the good payers from those who get into arrears by reference to other factors.

On average, single mothers may have more problems, or people without academic qualifications, or even redheads. But how would you like your financial affairs to be dictated by the fact that you belong to one of these groups?

When it comes to insuring the contents of our homes, we have had to accept that the postcode will dictate the price. That postcode gives a risk rating, because it is a possible pointer to where certain social groups live, and the way they lead their lives.

But not so many years ago, building societies had to retreat from their policy of 'redlining' certain areas - designating them so full of unruly payers and shoddy housing that they would refuse to lend to anyone living in them.

People want more individual treatment, and they want the decisions to be seen to be fair using acceptable yardsticks.

Life is getting increasingly bumpy. People will have to accept that they are going to have times in work, times doing part-time or contract work and periods with no work - and mortgages are going to have to take account of these ups and downs.

The plethora of discount loans that give borrowers a year or two at cheap rates are a way of helping first-time buyers to get established. But the nanny tendency would say that the sudden shock of having to pay the full rate is storing up trouble - never mind that most of these loans have variable rates, which always carry the risk of rates steaming away.

National & Provincial Building Society has started to explore more flexible mortgages. Its first deal gives young couples nine months at a discount followed by a three-month payments holiday - designed for the financial ups and downs of new parenthood.

While lenders move towards bespoke loans, individuals can try to take control by getting ahead during the good years - by shortening the term of the loan - and hoping that they will meet understanding in the lean years.

A SMALL tale to illustrate the horrible complexity of even the simplest financial transaction: A saver with pounds 9,000 to spare put the cash into a Nationwide Tessa feeder account, which would put the money into his Tessa each year over its five-year life.

The Nationwide slipped up by adding this account to a list of those where the savers had applied for gross interest by declaring themselves to be non-taxpayers.

The Inland Revenue then pounced - quite rightly - but wrongly retreated, saying that as it was a Tessa account no tax was due.

Of course this was only a feeder account, so full tax had to be paid. Only the Tessa itself is tax-free.

The end result was that the Nationwide bravely admitted its error and is generously paying the tax due.

But it is worrying that the Revenue could make such a basic mistake.