A book of stamps and a mortgage please

A book of stamps and a mortgage please

ATV licence, tax disc for the car ... oh, and I'll have a new mortgage while you're at it. The Post Office this week announced it is moving into the home loans business.

Three products - a three-year fixed rate, a deal aimed at buy-to-let investors and a "self-certification" mortgage designed for self-employed people - are being tried out at around 100 branches across the north of England.

But are they any good? The interest rates aren't table-topping, but the low fees mean that for some borrowers they will be worth considering.

The mortgages have been launched in conjunction with Bristol & West, the Bank of Ireland's lending arm. Here's what's on offer:

· A three-year fixed rate priced at 6.09%, available to first-time buyers, home movers and those looking to remortgage, where the maximum loan is 95% of the property's value.

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· For buy-to-letters, a three-year deal fixed at 6.35%, with a maximum loan-to-value of 85%.

· For the self-employed and other workers unable to prove their income, a three-year "self-certification" discounted rate deal where you pay the standard variable rate minus 0.8%, giving an initial pay rate of 6.44%. The maximum loan-to-value is 90%.

Two big plus points with all three deals are the low-ish arrangement fees - £399 in each case - and the fact that there are no "higher lending charges" to pay. Many banks and building societies impose an extra fee when people are looking to borrow more than a certain amount - usually 85% to 90% - and it can add thousands of pounds to a borrower's bill.

"We believe there is a real need for straightforward mortgage products which don't entice customers with headline-grabbing rates and then penalise them with huge fees," says the Post Office's director of lending, Gary Fitton.

Mortgage brokers have welcomed the low arrangement fees but say that generally speaking, these deals will not be competitive for larger home loans - those above around £200,000. Ray Boulger at broker firm John Charcol says that when it comes to borrowing bigger sums, it is usually worth your while paying a bigger fee in order to get a lower rate.

Looking at the 6.09% standard three-year fix, Mr Boulger says that for those able to stump up a deposit of at least 10%, there are plenty of better-value options out there. For example, Britannia building society has a three-year fix at 5.69% with a £499 fee. However, Britannia imposes a higher lending charge on anyone borrowing more than 90% of the value of the property.

So if you can only manage a 5% deposit, and you're not borrowing a huge sum, the Post Office deal looks pretty good value, he adds. Meanwhile, Bradford & Bingley has a three-year fixed rate at 5.89%, with a £999 fee but no higher lending charge.

Turning to the buy-to-let offering, David Hollingworth at broker London & Country says there are a number of deals on offer from other providers with rates significantly lower than 6.35%, but some of them have "quite chunky" fees - often a percentage of the loan amount.

UCB Home Loans, an arm of the Nationwide, has a three-year buy-to-let fix with a rate of 6.09% and a £695 fee, while Essex-based Saffron building society has a three-year fix aimed at investor landlords with a rate of 6.19% and a £499 fee.

On the self-certification front, if you don't need to borrow the full 90% - perhaps only 85% or less - there will be cheaper deals on the market.

Customers can register their interest for a Post Office mortgage either in the trial branches, online or by phone - though they have to apply via the dedicated call centre. When the trial is over, the Post Office will decide whether to roll out the mortgages nationwide.

Some have expressed surprise at the organisation deciding to go straight into buy-to-let and self-certification, bearing in mind the current economic climate in the wake of the US sub-prime mortgages meltdown and the Northern Rock crisis, and that these are fairly specialist areas.

And Mr Hollingworth questioned whether the Post Office would be the natural port of call for someone looking for a buy-to-let or self-cert mortgage. But he adds: "Potentially they are a very powerful distributor."

The Post Office describes itself as "the fastest growing financial services provider in the UK," with more than a million people holding products such as savings accounts and insurance. A spokesman stresses: "As a responsible lender, the Post Office will apply strict lending criteria and enforce appropriate checks before an offer is made."

r.jones@guardian.co.uk

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