Most major lenders offer some form of flexible mortgage which allows borrowers to take payment holidays or underpay when they need to, as well as overpay when they can afford to do so. Because in most cases interest on the outstanding debt is calculated on a daily rather than annual basis, overpayments make an immediate difference to the amount of interest you pay.Several providers including Virgin, Woolwich, Intelligent Finance and Britannic Money go one step further by offering current account mortgages These combine a current account with a mortgage. The advantage of this is that any credit balance you hold in your current account offsets some of your mortgage borrowing, thus keeping the interest you pay to a minimum. Yorkshire Bank has recently launched a current account mortgage product called Flexible Repay. Alliance & Leicester markets a flexible mortgage which does not include a current account, but charges interest at a discounted rate.While there are some highly competitive mortgages on offer, the marketplace for home loans has become very confusing, says David Hollingworth. Some of the biggest lenders including Halifax, Abbey National and Nationwide have brought in a second variable rate on which new mortgages are based, which is lower than their old standard variable rate. On the face of it, the introduction of this new rate cuts the cost of borrowing for consumers, but in most cases it is only available for existing customers who specifically ask for it.
"Some people have read about these new variable rates, but if they're on a discount, it is still linked to the old rate," he says.In a falling interest-rate environment, there is a very good argument for tracker mortgages where reductions in Bank of England rates will be passed on in full, says Ray Boulger. However, by introducing these new second variable rates, major lenders have already given guarantees that their variable rate will fall in line with base rates. "They've effectively made their variable rate a tracker," he says. And the same holds in practical terms for other major lenders, because in a bid to avoid public criticism, they are unlikely to let the gap between their variable rate and base rates increase.London & Country: 01225 870717John Charcol: 020-7611 7000. Homeowners and savers should test the theory that small is beautiful by looking to small regional building societies for some of the best deals on mortgages and deposit accounts. Quick and easy online searches for all yourmortgage and saving needs Homeowners and savers should test the theory that small is beautiful by looking to small regional building societies for some of the best deals on mortgages and deposit accounts. Local names such as Coventry, Hinckley & Rugby, Mansfield, Newcastle and Staffordshire all regularly have savings and mortgage products riding high in the best buy tables, outgunning bigger names such as Barclays, Lloyds TSB and NatWest. Sometimes you have to live locally to access these products, but often their savings accounts, mini-cash individual savings accounts (Isas), Tessa-only Isas and special mortgage deals are available nationwide.Building societies may have taken a kicking over the last 20 years.
Takeovers and mergers among the smaller players, plus conversions of big names such as Abbey National, Halifax and Woolwich, have sent numbers crashing from 250 in 1980 to just 67 today. But now many lesser-known societies are quietly fighting back against the big boys.Adrian Coles, director-general of the Building Societies Association, says the conversion trend has slowed lately, with only Birmingham Midshires converting in 1999 and Bradford & Bingley in 2000. He claims savers and borrowers are realising that because building societies, unlike banks, don't pay regular dividends to shareholders, they can pass on all profits to members via more competitive products.This has helped them build market share. While building societies hold just 17 per cent of the nation's savings, last year they took 40 per cent of new deposits and mini-cash Isas.
