Your Money: Cheap rates may not last

MORTGAGE rates are on the way down and it is intriguing to scan the offerings. But some of the most tempting terms might not be all they seem at first sight.

Take the mortgage capped at 7.95 per cent until the end of next year. Even with a pounds 260 fee, the chance to ensure your mortgage stays below 8 per cent, with the possibility that it might even go lower, looks too good to be true.

The problem is that the offer comes from the Bank of Ireland, which has kept its borrowers on extraordinarily high rates.

Current standard borrowers are paying 11.25 per cent, while some, such as the self- employed, are paying even more. That perhaps shows just how unlikely it is that the Bank of Ireland variable rate will actually drop below 7.95 per cent.

So a borrower seduced by the figure of 7.95 per cent might have 15 months of heaven followed by 23 3/4 years of pain.

That could be a slight exaggeration, as the Bank of Ireland may have other tempting fixed rates to move into at the end of the term. Meanwhile, borrowers can always move their loan, at a price, and the future may turn out to be completely different from the past.

The Cheltenham & Gloucester has a reputation for being on the ball and giving customers a reasonable deal. But while the once chart-topping London Share account has been sliding down the rates tables, mortgages have been performing a more complicated dance.

C&G undercut its rivals in January when it moved to 10.75 per cent while others were at 10.95 or 10.99 per cent. But this was on the assumption that rates would be moving down again before long.

In July, when there was no sign of a cut and savers' funds were being drained by National Savings, C&G threatened a mortgage rate rise. This forced National Savings into cutting the rate on its new First Option Bond.

In the latest round, C&G has again emerged as the clear leader at 9.75 per cent. Its terms are especially attractive for new borrowers with at least 20 per cent deposits, who get a one-year discount whether they are first-timers or not. But will it last if rates are not on the move?

C&G is already helping its margins by not moving existing borrowers on to the new lower rate until December, while borrowers with other lenders get the cut a month earlier.

All this does not mean that borrowers with the C&G will not get a decent deal in the long run.

They probably will. But it is as well to be aware that variable mortgage rates are variable, just as fixed rates last for only a tiny proportion of the life of the mortgage. So you should choose your lender by its record as much as its current offering.

THE near collapse of Municipal Mutual Insurance contains a warning for those buying buildings, contents and motor policies, as well as investors in life policies and unit trusts.

Despite the safeguards of the Policyholders Protection Act, no one should opt for the cheapest car insurance or home contents policy - much less an investment, especially one based on 'with profits' - without first questioning the strength of the provider.

Brokers have access to analysis and industry gossip and should be alert to which are the weak and which are the strong. Consumers must remember to ask the vital question, and ensure they get an answer.

JULIAN Farrand, the Insurance Ombudsman, has been rapped over the knuckles for being too consumer-although he, as the man charged with settling disputes between insurance companies and policy-holders, resolved disputes in favour of the company in two-of cases last year.

When it comes down to brass tacks, the Ombudsman scheme is paid for by the insurance industry. However much they might want to be seen to be playing fair, it is overwhelmingly tempting for those who pay the piper to try calling the tune.

THE accountancy firm Grant Thornton has designed a natty white plastic file for clients to hold bits of paper on their tax affairs. It is divided into pockets for dividend counterfoils, potential capital gains tax and the like.

Until Grant Thornton markets the organiser more widely, taxpayers should pinch the idea. It would make it easier to fill in their own tax forms and could, in theory, cut down on accountants' bills.