Terms brought ?10,000 saving

By repaying the interest on the ?373,000 loan from Geoffrey Robinson at a rate equivalent to bank base rate, Peter Mandelson would have saved himself almost ?10,000 compared to an ordinary borrower paying the standard mortgage rate.

Whatever the interest rate, no mainstream lender would have offered someone earning ?40,000-a-year a ?373,000 mortgage.


Assuming the loan started in November 1996 and the first payment was due in the December, the interest alone for the first instalment would be ?1,865 on base rate. This compares to ?2,172 for someone with a ?373,000 loan from the Halifax on its standard variable rate - a difference of ?307.


The repayment of ?40,000 in the spring of 1997 would have cut the payments. The gap widened out by the start of this year.


In January 1998 the monthly interest payment on the base rate-linked loan would have been ?2,011, while for the Halifax borrower it would have been ?2,414 - a difference of ?403.


Interest rates continued to rise but then held steady for a few months before starting to fall, bringing lower payments in October-November this year.


This month's payment on the base rate-linked loan would be ?1,734, while for the Halifax borrower it would be ?2,275 - some ?541 more.


Over the 25 months the loan has been in force and assuming the ?40,000 repayment was made on April 1 1997, the total interest paid on the loan would be ?48,580 in the case of the base rate-linked arrangement and ?58,266 for the Halifax borrower.


This works out at a difference of ?9,686.


Alliance & Leicester said it would lend 3.75 times the salary if the loan was less than 75 per cent of the property's value. Otherwise it is limited to 3.3 times salary.


The bank said that it would take other earnings and prospects for the future into account, and on someone earning ?50,000 a year (MP's salary with some journalism/ other earnings), with the hope of more, it might lend ?200,000.


No home loans company would fund the gap between that figure and the ?373,000, but other lenders can be found who would bridge the two figures if the borrower could come up with other forms of collateral such as a business, an investment portfolio, art or even the prospect of a large inheritance. However, borrowers would have to expect to pay 3 or 4 per cent higher interest rates than the mortgage.


The Nationwide Building Society said it would be "very unlikely" to lend someone on ?40,000-a-year the sum of ?373,000.


"As a fairly rough guide we would work on 3.25 times a person's income. If it was ?40,000 they could expect that we would lend them up to about ?130,000, based on their total earnings," said a spokeswoman for the building society.


But if the person intended to get another loan for the amount needed to bridge the gap between the ?130,000 and ?373,000, this would almost certainly affect the calculations.


MPs are something of a special case. Their "contract" might be renewed by the voters but then again it might not. In November 1996 there was no guarantee that Mr Mandelson would retain his job as an MP, let alone become a minister.