Cast some light on our mortgage fix

Vital statistics

Tony Edwards and Sooki McShane

Ages: 33 and 31

Live in: South London

Occupations: Lecturer and casting assistant

Earn: £27,500 and c.£15,000

Mortgage: £100,000

Debts: None

Investments: £2,000 in deposit accounts

Pensions: Tony - occupational scheme, Sooki - none at present

Aims: To reduce mortgage costs, look into a stakeholder pension for Sooki and make the best use of savings

Tony Edwards lectures in human resources management at one of the newer universities in London. He likes to call his subject 'industrial relations' but he says that is not fashionable now.

Before starting at this job 18 months ago, he worked at Warwick University for four years. He made the move to London because his wife, Sooki, works in casting - a largely London-based job - and he ended up commuting between London and Warwick every week.

Mortgages and pensions are their two main financial concerns. They bought their first property, in Brixton, four years ago and thought they were getting a good deal then when they took a five-year fixed-rate loan at 7.99 per cent, but as variable rates have fallen it looks increasingly expensive.

Earlier this year they moved to a bigger flat in East Dulwich and took a second loan at a fixed rate of 5.99 per cent for two years. They got their mortgages, both on a capital repayment basis, from the Cheltenham & Gloucester, through their bank, Lloyds TSB.

Tony says: 'We now have a hefty mortgage of £100,000 and we are looking for ways of reducing the cost when the original loan reaches the end of its five-year term in May. We are tempted by a current account mortgage but are not sure if it makes sense.'

He is not too worried about his pension: he is a member of the university's occupational pension scheme and makes additional voluntary contributions to the Prudential, which he increased to 5 per cent of his salary a year ago. Sooki, however, has no pension provision and they are wondering whether she should take out a stakeholder pension. She is employed three-and-a-half days a week by the Nottingham Playhouse, though she is mainly based in London. The rest of the time she works freelance. She has recently been offered a stakeholder pension by the Nottingham Playhouse. The scheme is with Norwich Union but her employer will not be making any contribution and she is wondering whether this would be the best stakeholder pension to go for. She is interested in investing ethically if possible.

Tony and Sooki have around £2,000 each in instant access savings accounts. Sooki's savings are in the Lloyd TSB premier gold account, while Tony's are in a Abbey National deposit account. This is basically rainy day money but they wonder if it could be put to better use.

They have no debts. But they do enjoy travelling and like to get away for a winter as well as a summer holiday if they can.

They would like to start a family in a couple of years, but Sooki would probably continue working.

Adviser 1: Gordon Wilson

Tony and Sooki are wise to consider remortgaging at the end of their fixed-rate period. With rates as they are, I would seek out a low- rate fixed or capped deal with a reasonably long term. This would be especially suitable as they want to control costs as far as possible and are considering starting a family.

Stakeholder pensions are ideal for Sooki: very low cost, very flexible and there is extensive investment choice available. She will get tax relief added to her payments - for every £100 she pays, the Inland Revenue will add £28. She can vary contributions without penalty and they can be paid whether she is working or not. The Norwich Union option is worth considering as it is low-cost, the company is strong and they have one of the largest fund ranges to choose from, including several which may suit Sooki's ethical interests.

Tony can have a stakeholder as he earns less than £30,000 a year and would probably be well advised to choose one over an AVC. Stakeholder pensions offer all the same tax benefits as an AVC but up to 25 per cent of the fund can be taken as cash at retirement, unlike AVCs which must be taken as pension only.

They should pay any spare cash into mini cash Isas as this will give accessibility with good interest rates, tax free. The Nationwide offers one of the most competitive high street accounts. They also need to consider mortgage protection, life assurance, and critical illness insurance. This will become more important when they have children.

· Gordon Wilson works for financial adviser Thomson & Shepherd

Adviser 2: Bruce Maskell

Current account mortgages are a relatively new concept: interest is charged daily on the amount of the loan, less the monies held on deposit in the account, including any salary payments. They are attractive to people with large sums on deposit or whose earnings fluctuate substantially from month to month. Interest rates are often on a variable basis and are a little higher than fixed-rate offerings. With the current low interest rates, a fixed-rate deal for two to five years could prove more attractive. After that time, Tony and Sooki could consider remortgaging again to minimise their costs.

A stakeholder pension would suit Sooki. She can make gross contributions to a stakeholder pension of up to £3,600 in the current tax year. If she chooses to join her employer's scheme with Norwich Union, her contri butions could be made by payroll deduction, although there is no obligation for her employer to contribute. Norwich Union is one of the largest providers of stakeholder pensions and offers a good range including six 'ethical' funds.

Tony and Sooki should consider utilising their annual Isa allowances. They can invest up to £3,000 each this tax year in mini cash Isas. The interest is not subject to tax and current rates are around 5 per cent. Tony could even consider an Isa as an alternative to pension funding, if he would like more flexibility and access to his funds in future. He could look at equity-based Isas. All leading investment houses offer these contracts.

· Bruce Maskell works for financial adviser Maskell Moss

· Advice is for guidance only.

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