Who was it first came up with the notion that a mortgage must be a 25-year financial straitjacket? Whoever it was, those who followed him believe we are still an immutable nation of Cholmondeley- Warners, middle-class buffers for whom the words "excitement" or "changing lifestyle" mean a double helping of spotted dick at lunch.
And underlying this assumption of rigid and unchanging monthly payments, subject only to the occasional vagaries of changing bank base rates, is another, equally old-fashioned idea. It reeks of Fifties-style certainties, of staying in one job for life and never being made redundant. Of coupledom where women aren't important wage- earners in their own right, and it hardly matters if they stop work to bring up a child because the husband will always be there to pay off the mortgage in full.
Of course, that's all nonsense - we know it is. Today, we live in a world where it is highly likely we will work for many employers in our lifetimes, earning varying amounts - sometimes more, sometimes less - able to pay off part of our mortgages in large chunks, or perhaps needing to borrow some of it back on occasion. None of this is tremendously new. If anything, it is the culmination of two decades or more of social transformation. More surprising is the way, until recently, that the vast majority of mortgage lenders failed to recognise these changes and adjust their products accordingly. Lenders are moving at last, however. And the product of their own metamorphosis is the flexible mortgage. Over 20 major lenders now offer flexible schemes, although some big names such as the Halifax, Abbey National and Bradford & Bingley have yet to join in. They work by allowing borrowers to raise and reduce the outstand- ing loan on their home as and when they please. Reducing the loan, either by increasing your monthly repayments or making ad hoc lump sum payments, reduces the interest paid and can shorten the mortgage term. Many flexible schemes reduce the loan as soon as a payment is made, rather than at the end of the year as often happens, so the easing effect on any debt is immediate. For example, a loan of pounds 60,000 in which interest is calculated daily rather than annually, would save pounds 6,944 in payments and lop 15 months off the mortgage, assuming a rate of interest of 8.2 per cent. Meanwhile, the ability to get at the money again, without the usual rigmarole of re-mortgaging, provides a cheaper alternative to other means of borrowing such as personal loans and credit cards. Some providers make it even easier, providing chequebooks, ATM cards and other facilities to make "withdrawals" against a home loan. A typical example is Legal & General's Flexible Reserve mortgage. Borrowers can make overpayments of pounds 500 or more towards the mortgage (pounds 50 or more on a monthly basis) which reduces the interest on the loan. Overpayments are pooled into a reserve and can be tapped into at a later date. Borrowers can request withdrawals by post, fax or Internet. "It's great for the self-employed, those working on short-term contracts or anyone with erratic earnings," says Peter Timberlake of Legal & General. "Customers can pay extra towards their mortgage during the good times, safe in the knowledge that they can get at the money to tide them over when they aren't working." The latest twist are "current account mortgages", which aim to integrate all your banking and borrowing needs. The pioneers of cheque account mortgages are Kleinwort Benson, First Active (formerly Mortgage Trust), and Virgin. Their key feature is that you pay in your main salary each month (First Active's doesn't require this and leaves the choice to borrowers), which automatically reduces the loan. …