Wait a minute. The value of plonk? To back a mortgage? To keep the roof over your head? Has the world gone mad? Blame the brain-melting heat, blame the silly season, blame too much grape juice imbibed at that shindig in Jerez, but some bright spark at Premier Cru Fine Wine has come up with a repayment vehicle for a mortgage based on the growth in value of your wine stock.
It’s called Home Cellars and it has been touted as the solution to the problems faced by first-time buyers. What a joke. It is claimed it will “take advantage of the growth in the wine market to make home loans more affordable”. Really?
The idea is that borrowers take out an interest-only mortgage then make separate monthly investments in fine French wines. The theory is that the value of the wine will grow sufficiently during the period of the loan to repay the capital.
Premier Cru forecasts a 10% rise in the value of the wine stock each year. Accordingly the deal will be cheaper than taking out a repayment mortgage. I can’t believe that any broker would be irresponsible enough to seriously suggest this idiocy to a customer, especially a first-time buyer. Most of them can barely afford to buy a one-bedroom flat. Where’s the wine cellar going to be – on the roof?
It is risky to opt for an interest-only mortgage but I know some advisers believe this is a short-term option to cut initial payments.
But if investing in an endowment is risky what does that make wine? And who do you sue for compensation when your wine turns out to be corked when your mortgage matures.
I expect rival nutty notions to appear on the market in the coming months. Here are a few of the deals I imagine are being considered by enterprising providers:
The Grand National mortgage: Borrowers take an interest-free mortgage then save up to put a big bet on a rank outsider at Aintree. The winnings repay the capital and if you don’t win, at least you have a nice day at the races.
The Smurfs mortgage: Borrowers invest in collectible Smurf characters from eBay and keep them until their interest-free mortgage matures. The growth in value of the wee blue people repay the capital.
The bananas mortgage: Investments are made in banana plantations and the growth in value repays the mortgage.
The water meter mortgage: This one not only saves you money but saves the planet too. You install a water meter and every penny you save on water goes to repay your mortgage. The less you flush, the quicker you pay for your home.
Let’s hope they all end up where this wine deal should – down the toilet.