Mortgage lenders are being urged to do away with the Migs (mortgage indemnity guarantees) that they make those with only small deposits take out, says Rupert Jones in The Guardian, and quite right too. Mig payments can easily run into four figures: Royal Bank of Scotland charges £1,790 a year for someone taking out a £95,000 mortgage on a £100,000 house, for instance. But they don’t actually benefit the borrower at all. Instead, the bank uses them to buy insurance to reimburse them as the mortgage lender if you stop paying your mortgage. You pay. They collect.
But don’t be too quick to think you are saving if you go with the lenders who don’t charge for a Mig: they still find ways of getting the cash from those with low deposits. Nationwide will charge you 5.49% on its two-year fixed-rate loan if you can only manage a 5% deposit, for example, but cut this to 4.99% if you can do 25%.