As well as being one of the most successful vehicles for personal investment in shares, PEPs have also been one of the most flexible. They have been used for a variety of purposes, including mortgages.

Interest-only mortgages are usually associated with endowment policies but any suitable savings vehicle can be used. For interest-only mortgages, the borrower makes payments, normally monthly, to the lender for the interest on the loan.

The capital sum is repaid at the end of the agreed loan term from the proceeds of the savings or investment. In the case of PEPs, it was normal to make regular monthly contributions into unit trusts or single company schemes which qualified for the tax relief.

But one-off payments or even a combination of both were allowed, as long as they were in line with the annual allowances of #6000 for a general PEP and #3000 for a single PEP.

It was popular with higher net-worth individuals but one in three mortgages with the Halifax in 1997 was PEP-based. Although it was a higher-risk investment strategy than endowments, they benefited from the fact that stock market fluctuations tended to be more immediately reflected in PEP valuation.

There was no guarantee, though, that the investment products would generate enough to repay the mortgage and the returns depended on fund performance and stock market conditions.

Most PEP mortgage-holders should be able to transfer smoothly to ISAs but those with larger mortgages might need to make additional arrangements, and they should be careful not to transfer to the wrong kind of ISA.

''For the vast number of people who need the ordinary level of mortgage there should be little difficulty as long as they convert to an ISA of a similar type,'' said independent financial adviser Les Shields. ''If their mortgage premiums are above #3000 a year they should be going for a Maxi.

''People with very large mortgages will have to go for a Maxi and find other means of building up savings such as a unit trust savings plan or open-ended investment company.''

John Chiesa, of Westwood IFA, said: ''You will be unable to make additional contributions to Peps after April but most providers are allowing you to convert your monthly contribution to ISAs.

''So you will be able to convert into ISAs within the limits. Subject to reasonable contribution levels there should not be any problem.''

But he suggested keeping the tax advantages of PEPs for retirement. ''Clients may wish to keep it for longer than their mortgage,'' he said.

''If the mortgage is not going on to age 65, the PEP investment may be more valuable than for redeeming the mortgage.

''In the case of clients with substantial PEP holdings they could be very important on retirement. I don't think the ISA is going to affect mortgage planning drastically but it could affect long-term planning.''