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Flexible Loans

Flexible mortgages are now plentiful and popular but until recently there have been few fixed-rate deals available. 'Flexible' has become a fairly ubiquitous term, describing everything from the ability to make occasional lump-sum repayments of your mortgage to a current account mortgage, where your home loan is, in effect, an overdraft secured on your property.

Research carried out on behalf of lender First Active Financial shows that flexible loans account for 11 per cent of total gross mortgage lending - or 4 per cent of total loans in place. Such loans, unheard of a few years ago, are estimated to account for 50 per cent of gross lending by the end of the year. Until recently they have been offered mainly with variable rates of interest.

Around a dozen lenders now offer such loans with fixed rates. There are risks with flexible loans of course: borrowers need to ensure that they do not over-borrow against the value of their homes, a temptation that may grow with rising property values.

As interest rates rise, flexi-loans with fixed rates may appeal to some borrowers, especially those who feel they are likely to increase their borrowing over the short term rather than to pay off lump sums.

Once you have taken everything into account, including various perks such as no Mortgage Indemnity Guarantee (MIG) charges and free legal fees, there is not a great deal to choose between the various options.