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Five minute finance: Savings and mortgages

Five minute finance: Savings and mortgages

Category: Money

Updated: 01/06/2010
First Published: 01/06/2010

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 It is now over 6 months old so the content may be out of date.

The balance between mortgage and savings rates is a delicate one and as providers focus falls on one area of the market, the other often suffers. As conditions in the mortgage market have improved, we have seen increased competition amongst lenders driving average mortgage rates to their lowest level in a year.

While this is good news for borrowers looking to secure a more competitive mortgage deal, it is savers who continue to suffer as providers reduce savings rates to compensate for the mortgage reductions.

Fixed rate bonds have been the hardest hit, particularly one year bonds where the average rate stands at an all time low of 2.67pc. ISA rates have quickly fallen back to pre-ISA season levels and a number of best buy notice deals have this week been withdrawn.

Savers will be hoping that the Bank of England takes the decision to raise bank base rate sooner rather than later.

Bonus boost

West Bromwich Building Society is offering a market leading rate in the easy access savings account market. Its Direct Bonus Account is paying 3.00pc, including a 1.00pc bonus until 31 March 2011. Savers can invest between £1,000 and £100,000 into the account, but it must be new money to the provider. No notice is required to access funds, but no more than three withdrawals are permitted per annum. This account is operated by post or by telephone.

Aim for top rates

Savers looking to fix the rate paid on their money in the short term may like to consider the Treble 16 Bond from Scottish Building Society. The bond matures on 23 August 2011 and pays a fixed rate of 3.00pc. Savers can invest between £1,000 and £500,000 into the branch and postal operated bond. Once opened, further additions and earlier access is not permitted.

Top rates online

Leeds Building Society has just launched its Albion Web Saver account paying between 1.35pc and 2.25pc, depending on the amount invested. Unlike many other savings accounts, a short term temporary bonus is not included in the rate. Savers can invest between £2,500 and £1m into this online operated account, while unlimited penalty free withdrawals can be made at anytime.

Savers take note

If savers don't need instant access to their money and are happy to give a small amount of notice then Close Savings is offering the highest variable rate on the market. Its Premium Gold 180 Day Notice account pays 3.15pc on balances of between £10,000 and £1m. If the balance falls below £10,000, 0.50pc interest is paid. As the name suggests, savers must give 180 days' notice to access funds, as earlier access is not permitted.

Yorkshire launches market leading mortgages

Borrowers looking to fix their mortgage rate might like to look at the deals being offered by Yorkshire Building Society. The society is currently offering market leading fixed rate mortgage deals for borrowers with a 25pc deposit. Borrowers can opt for a two year fixed rate deal at 2.95pc or a three year fixed rate deal at 3.89pc. An option for free legal and valuation fees is available, with rates 0.10pc higher. All deals will be subject to a £995 arrangement fee.

Find the best savings rates for you - Compare savings accounts

Find the best mortgage rate - Compare best selling mortgages

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.