Your feature on fixed-rate mortgage deals raises many interesting points regarding the more innovative forms of financing one's home that have appeared over the last few years. Not since the heady days of the late 80s and the foreign currency mortgage have we seen such a variety of mortgage options available to the general public.
One can choose from a large and detailed menu. ''Repayment'' or ''interest only'' as an appetiser followed by a delightfully complete selection of entrees including ''variable'', ''capped variable'', ''fixed rate'', ''part-fixed'', ''part-variable'', ''easy-start'' together with a fine selection of ''discounts'' and ''cash backs'' on the side.
If one excuses my use of flippancy there is a very serious point here: these products are complex financial instruments and in essence are no different from the ''demon derivatives'' responsible for huge losses at Proctor and Gamble, Metalgesselschaft, and most famously the bankrupting of Orange County in California. That such organisations can get it wrong should serve as a warning.
These products are not inherently bad. Indeed I myself have employed them to finance my home over the last six years. It is merely that due to their complex nature their suitability for each individual must be carefully assessed, preferably with the aid of a professional adviser.
This brings me to the crux of the wider problem: the lack of competent professional advice. If Mrs Morag Mack, a ''director of Scotland's largest independent mortgage advisers, the Mortgage Advice Bureau'' (Herald, May 18) can get it wrong then what hope for everyone else? I must say I am incredulous that a mortgage adviser believes that it should be possible to finance a mortgage indefinitely at 3% discount to Base Rates. Where are the margins for institutions when they borrow at or near Base rates and then lend until the expiration of the mortgage at 3% less? They must cover their costs and make a reasonable return for their shareholders/members.
If a professional such as Mrs Mack fails to understand this situation then heaven help the average borrower dazzled and confused by the increasingly complex structures in the future. If Mrs Mack's dream mortgage were to exist there wouldn't be many lenders left.
The new mortgage products can offer helpful and innovative solutions for the home buyer in the short term, but these are funded by commercial institutions and must generate a return eventually. There will be a payback for hedonism sometime within your 20 years. Caveat emptor.
Stewart J K Cameron,
12 Royal Crescent,
Holland Park, London.
May 19.
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