Surfers in the house

Are you better off getting a home loan on the net? asks Clare Francis

Taking out a mortgage is the biggest financial decision of most people's lives. It is one thing to buy a book or a CD on the internet, but would you risk 25 years of loan repayments on half-an-hour's surfing? Some new and traditional lenders are betting you will. Promise - a phone and net remortgage provider - has launched a range of products for the online buyer.

Other lenders are backing the traditional approach, saying online services are no more than marketing tools. "The internet just represents another distribution channel that increases the choice available to our customers," says Esther O'Reilly, of Cheltenham and Gloucester. Sharing this view are NatWest, Halifax, HSBC and Nationwide: they do not differentiate between what is available via the net, phone or local branches.

Whichever way is right, the effect has been to stimulate competition - and cut prices. Even brokers are getting involved. John Charcol, has launched charcolonline - an integrated net service combining mortgage search, product selection and application, all online.

"People no longer have to shop around the high street in search of the best deals, nor do they have to pay fees for advice," says Toby Strauss, managing director of charcolonline. You can now search for the best deals without the stress of having to visit individual banks and building societies.

Charcolonline will search more than 300 products from 25 of the country's top lenders, including Standard Life, Egg, Halifax, Nationwide, Woolwich and Abbey National.

Two other brokers, Avoncourt and Emfinance, offer similar online search services. Opting for this method, rather than enlisting the help of an insurance adviser, can save you fees. If e-mortgages take off as lenders - including Barclays - predict that they will, inevitably there will be more price reductions.

Lenders that are solely on the net and phone-based, such as Egg, Marbles and Promise, have lower overheads - and these are affecting prices generally. This is all good news for the British consumer, whether you choose to shop online or stick to the high street. The Which? report released this week, which reveals the extent of rip-off Britain, means that such price cuts will be greatly welcomed.

Competition is forcing mortgage lenders to introduce a new range of products. For example, Halifax's Millennium Mortgage offers a rate of 4.99 per cent. Until 31 January 2002 there will be a 2.25 per cent discount off the standard variable rate, no repayment or arrangement fees and a loan of up to 95 per cent of the property value. Alliance and Leicester's offer of pounds 1,000 cash back on completion, and an initial rate of 5.24 per cent further illustrates some of the special deals that are available.

First-time buyers may not be familiar with the extra add-ons needed when taking out a mortgage, the most obvious being life assurance. Be aware that lenders who offer the lowest mortgages tend to bang up premiums on their life insurance. But you don't have to buy from your lender. Research from Life-Search shows consumers can cut life premiums in half just by shopping around. In the same way that charcolonline and Avoncourt offer search services for mortgage deals, Life-Search and Ins-site have a facility for those wanting quotes and advice about life assurance without the cost of broker fees.

However, for those who are prepared to phone around the various lenders or visit their branches, the deals on offer on the internet are not necessarily any cheaper than those available on the high street. There is also the time factor. The internet may let you shop from home or the office, but it is time consuming and can be frustrating. We spent an irritating hour trying to access the sites of a number of online lenders.

Charcolonline was the most user-friendly. At www.egg.com we sat in front of an unmoving screen for ten minutes, unable to even look at what was on offer. For some, the cost of an adviser or the hassle of visiting individual lenders will be preferable to frozen screens and the absence of human contact.

n www.ipromise.co.uk

www.charcolonline.co.uk

www.emfinance.com

www.avoncourt.co.uk

www.barclays.co.uk

www.natwest.com

www.cheltglos.co.uk

www.skipton.co.uk

www.halifax.co.uk

www.alliance-leicester.co.uk

www.life-search.co.uk

www.ins-site.co.uk