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Five minute finance: Beat the base rate

Five minute finance: Beat the base rate

Category: Savings

Updated: 09/08/2010
First Published: 09/08/2010

MONEYFACTS ARCHIVE
This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

As expected, the Bank of England chose to keep the base rate of interest at its historic low of 0.5% last week. Experts remain divided over when the rate will start to rise, with some suggesting early next year, and others opting for the end of 2011 or even later.

The uncertainty means savers have a difficult decision to make: do they opt for the higher fixed rates now, which may become uncompetitive if the base rate rises sooner rather than later, or do they opt for the lower variable rates and benefit from rate rises as soon as they happen?

Thankfully, the banks and building societies have recently started to offer another savings option. In the last two months, a number of providers have launched variable rate tracker bonds. Like fixed rate accounts, money is held by the provider for one or two years. The difference, however, is that the rates will track the base rate, so any rises will be passed on.

Currently, rates on one and two year tracker bonds sit just below the market leading fixed rates, making them a real credible alternative for savers at this moment in time.

Top rates online

Chelsea Building Society, part of the Yorkshire Building Society, has launched its new two year e-Bond paying 3.65%. For savers wanting a regular income, a monthly interest option is available. Savers can invest from £100 into the online bond, which matures on 30 September 2012. Further additions are permitted whilst the issue remains open, but access to funds is not permitted during the term.

Bond bonanza

Santander has launched a range of new fixed rate bonds, including a one year bond paying 2.80% and a 15 month bond paying 3.00%. Up to £2m can be invested into the bonds, which offer a monthly interest option for savers requiring an income. The bond can be operated in branch, online or by telephone. Once opened, further additions and earlier access is not permitted.

Best buy bonds

After a two year absence, Sainsbury's Finance re-entered the fixed rate savings market back in June and has continued to offer savers competitive rates ever since. Its latest two year bond pays 3.55%, with savers allowed to invest between £5,000 and £50,000. The bond is operated online or by telephone, but once opened, further additions and earlier access are not permitted.

Lowest mortgage rates

Borrowers looking to fix their mortgage repayments for the next five years are being offered a market leading deal from HSBC. At 3.95%, the rate is the lowest ever longer term mortgage rate offered by HSBC and is available to borrowers with a 40% deposit. Alternatively, borrowers with a 30% deposit are being offered a market leading tracker deal of 2.19% (1.69% above bank base rate). Both deals are subject to a £599 fee.

Loyalty pays

Norwich & Peterborough Building Society is rewarding customer loyalty by offering existing customers (any product) with the society a market leading two year fixed rate mortgage deal. Borrowers with a 15% deposit are being offered a rate of 3.64%, 0.31% less than its nearest competitor. A product fee of £995 is payable. Alternatively, the society has launched a range of new mortgage deals open to all borrowers, including a market leading three year fixed rate mortgage at 4.19%.

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

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