Lender launches new mortgage - and throws in a car

West Bromwich Building Society today launched a mortgage deal to tempt borrowers. People taking out the new 'Brum brum' mortgage will get a new Rover 25 hatchback with their home loan.

The car, with a list price of ?7,995, comes free, but borrowers will have to pay for road tax, insurance and a registration fee.

Stephen Karle, group services director at the building society, said: "For first-time buyers it means they can now own both a new home and a new car, something many could only dream about."

However, critics have pointed out that the interest rate on the mortgage is fairly uncompetitive, at 5.99%, and because this rate is variable, a rise in the Bank of England base rate would see it rise even higher.

The deal also comes with a lengthy tie-in period. If borrowers want to redeem the loan within five years, they have to pay 7% of the outstanding loan, to a maximum of ?7,000.

The mortgage is only available for loans of ?90,000 or more, and can only be taken out directly with the building society.

David Hollingworth of mortgage broker London & Country said the deal was "slightly gimmicky."

"It is essentially like a cash-back deal," he said. "But instead of getting a low rate, you get all your benefits up front. And instead of cash, borrowers get a car." On the minimum loan amount of ?90,000, Mr Hollingworth said, this is not a bad deal, as the cash back is equivalent to around ?8,000, but on larger loans it works out as being less generous.

"People have to make a judgement about what they want, what would serve them best. A lot of people would be better off going for a better rate," he added.

David Bitner, head of product operations at The MarketPlace at Bradford & Bingley, said: "It's a nice twist but you can get just as much value from a discount mortgage and buying your own car. That way you can choose your car."

Mr Bitner added that somebody who had a ?150,000 mortgage who took out a market leading discount loan could get a rate of around 2% below that being charged by West Bromwich and save around ?15,000 over five years.