Mortgages with all the trimmings

For many homeowners, battered by a tide of extra bills in the run-up to Christmas, arranging a new mortgage is the furthest thing from their mind. For some, it is possible, however, to combine a mortgage with the chance to help pay for the festive season. For others, the opportunity to snap up one of the increasingly varied mortgages on offer should be on the "must-do-now" agenda.

Among many interesting deals this week is one from Britannia Building Society, which guarantees that if mortgage rates rise between now and September 1999, it will cut its own loan rates. The Britannia mortgage, underpinned by using specialist hedge funds, is set at 6.99 per cent. Should standard variable rates rise in the next year or so, the society's will drop by the same amount.

If, for instance, mortgage rates go up to 7.99 per cent, Britannia's new mortgage drops to 5.99 per cent. And so on to a low of 4.99 per cent, equivalent to a rise in standard rates of 8.99 per cent. Conversely, if variable rates drop, this one won't go beyond its 6.99 per cent limit.

Richard Taylor, the society's product management controller, says: "It is an attractive alternative for all those thinking of fixing their mortgage rates with a general election looming and bank rates on the increase."

Mortgage Intelligence, which represents 400 independent home loan experts throughout the country, has launched a Christmas Cashback mortgage, where a lump sum is paid to borrowers when the loan goes through. Chris Scales, head of development at Mortgage Intelligence, says: "Back in September, we spoke to our brokers and they told us that many of our clients wanted a cashback deal.

"Our research indicated that the average extra monthly spend of a family at Christmas was about pounds 500 to pounds 600, so we have tried to tailor a product that will allow a 1.5 per cent cashback every year for three years to take this additional outlay into account."

The Christmas Cashback, arranged through Market Harborough Building Society, has a variable rate of 6.99 per cent. On a pounds 68,000 loan, this would mean a cheque for pounds 1,000 dropping onto the doormat for three years. The society pays up to pounds 300 towards remortgage costs, based on a maximum of 90 per cent of a home's value, and there are no arrangement fees. Redemption penalties are spread over five years and involve three months' interest, plus repayment of the cashback. To sweeten the deal, Mortgage Intelligence promises that if an application is made reasonably ahead of Christmas, a provisional offer can be made in time to negotiate a separate short- term loan with the bank manager.

For those who prefer a plainer deal, Market Harborough also has a 2 per cent cashback, paid in a one-off lump sum, plus a 2 per cent discount on the 6.99 per cent variable rate until December 1998. The offer is saddled with compulsory buildings and contents insurance, plus a pounds 295 arrangement fee and the usual penalties. But it does include free unemployment insurance and the facility to overpay by up to pounds 100 each month, reducing the mortgage without penalty.

For Mark Chilton, marketing director at FirstMortgage, cashbacks are not the sweetest deal on the block. FirstMortgage, a telephone-based lender, is promoting its own 7.69 per cent mortgage, fixed for five years.

The deal might seem poor, compared to a five-year fix from Lambeth Building Society at 7.45 per cent or Bristol & West at 7.48 per cent. But Mr Chilton points out that the Lambeth deal is subject to compulsory unemployment insurance, while Bristol & West applies an annual "rest" - when the outstanding loan is re-calculated - on its loans, compared to monthly "rests" with FirstMortgage.

One noticeable feature in the mortgage market is the apparent disparity between the deals available on discounted deals as compared to fixed rates. Northern Rock, for instance, offers a 2.75 per cent discount on its 6.99 per cent standard variable rate for three years, bringing the effective cost of its loan to 4.24 per cent at present.

In the run-up to Christmas, fewer people are searching for a new home. But that should not stop canny borrowers who know that they will be on the house-hunting trail in the new year. It pays to lock in now, as long as the lender is prepared to wait for draw-down on the loan to take place in a few months' time.

Mortgage Intelligence, 0800 246000; FirstMortgage, 0800 080088; Britannia, through branches.