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Flexible mortgages - don't be in the dark

Many borrowers are not aware of the options of a flexible mortgage product when shopping around for their home loan. According to the latest findings from Alliance & Leicester's movingimproving index, almost one in two (49 per cent) of Britons are not aware of the benefits of a flexible mortgage: one that can adapt as life changes.

A flexible mortgage is ideal for those customers who wish to take advantage of a range of benefits including overpayments, underpayments and taking payment holidays.

Only one in four (25 per cent) people are aware that a flexible mortgage can allow borrowers to make overpayments, and even fewer (15 per cent) know that a flexible mortgage allows for underpayment or for payment holidays.

Paul Cooper, Head of Mortgages at Alliance & Leicester, said: “Finding the right mortgage can sometimes be a daunting experience with so many different types to choose from. If people aren't sure what sort of mortgage would be best for them, we advise that they speak to a qualified mortgage advisor to get expert advice.”

“Flexible home loans can be a useful way for homeowners to make their mortgage work for them. They offer people the chance to adapt their mortgage to suit their needs, for instance by overpaying when spare capital is available, or underpaying or taking a payment holiday in leaner times.”

Cooper continues: “We're focused on giving customers as much flexibility and choice as possible, so we offer flexible features on a range of our traditional discount, fixed and base rate tracker mortgages so they can enjoy the best of both worlds.”

Alliance & Leicester's quarterly movingimproving index asked a GB representative sample of 2,000 people what, if anything, they think (from a number of different options) are some of the features and benefits of a flexible mortgage.

Other findings:

• Men are more knowledgeable when it comes to flexible mortgages, with 45 per cent knowing one or more of their features compared to only 33 per cent of women.
• Those in their 30s and 40s are the most likely to be familiar with flexible mortgages, with 54 per cent of both age groups identifying one or more features.

Around the regions:

• People in the North have the greatest knowledge of flexible home loans, with 48 per cent being able to identify one or more benefits, including 38 per cent who are aware that they allow borrowers to make overpayments and reduce their borrowing term or the size of their monthly repayments.
• The Welsh are the least likely to be familiar with flexible mortgages, with fewer than one in three (31 per cent) being able to identify one or more features. Only 32 per cent of those in London or Scotland can identify any features. In addition, 19 per cent of those living in the capital think there are no benefits at all to a flexible home loan.

Example of the savings that can be made on a flexible mortgage:

• For a home loan of £85,000 on a rate of 3.64 per cent (the current A&L two-year flexible discount mortgage), over a term of 25 years, the monthly payment would be £431.94, the term end date would be November 2028 and the estimated interest charged would be £44,581.
• If the payment were increased by £100 per month to £531.94, the term end date would be March 2022 (six and a half years earlier) and the approximate total interest charged would be £31,446, giving the homeowner a saving of £13,135.