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Five minute finance: Savings & mortgages

Five minute finance: Savings & mortgages

Category: Savings

Updated: 15/03/2010
First Published: 15/03/2010

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 It is now over 6 months old so the content may be out of date.

Over the last few months mortgage rates have been falling and while this is positive news for borrowers looking for a new deal, it is bad news for savers. In order to maintain their balance sheets, providers can either opt to offer competitive mortgage rates or savings rates, but not both and with the focus now on mortgages, savings rates have continued to fall.

This week alone more than 30 products have been withdrawn, including a number of best buy deals and while many have been replaced, in many instances the new issues are paying lower rates. Other savings deals have also seen rates reduced by nearly 1% in some instances.

Since November 2009 savings rates have continued to fall, with ISAs being the only notable exception. ISA savers could now have more than £60,000 invested, so it is little wonder that providers are attempting to attract savers' tax-free money. Unfortunately for savers this increase in ISA rates may be short lived as once the ISA season ends in a couple of months, rates are likely to fall.

New account from NS&I

National Savings and Investments have this week launched its Direct Saver account paying 2.00%. Savers can invest up to £2 million with the Government-backed provider. The account is operated online or by telephone and requires no notice from savers to access funds, although all withdrawals must be made via a nominated account.

Maximise your returns

The 2009/10 tax year has to date been the most successful year for stock and shares ISAs since their launch in 1999. Savers looking to invest their money in a stocks and shares ISA might like to consider the new Fixed Rate Investment ISA from Barclays Bank. The ISA requires a five year commitment and savers can invest upwards of £3,600 into the account, which accepts transfers in. There are two options available: the income option, which pays an annual rate of 4.00%, or the growth option, which pays 22.25% (4.45% per annum).

Best buy tracker mortgage

While the number of deals for borrowers with a 15% deposit is growing, the amount available remains limited. This week saw Yorkshire Building Society cutting the rate of its two year tracker by 0.60%, to 3.79%, making it a best buy deal for borrowers with a 15% deposit. A £495 arrangement fee is payable, but the deal comes with a free valuation and legal fees. An offset version of the deal is available at a 0.10% higher rate.

ICICI remains top

Despite a small reduction in the rate this week, ICICI Bank UK continue to offer the market leading rate for savers looking for a two year commitment. Its HiSAVE Fixed Rate Account pays 4.10%, with a monthly interest option available for those looking for a regular income. Savers can invest upwards of £1,000 into the account, but once opened further additions and earlier access are not permitted.

Rachel Thrusell, Principal Consultant for Banking and Economic Insight at commented: "ICICI Bank UK continues to offer some of the most competitive fixed rate bonds on the market. Savers concerned about investing with a perceived foreign bank should not be concerned as ICICI Bank UK is fully registered with the Financial Services Authority and comes with the same protection from the Financial Services Compensation Scheme as all other banks."

Find the best savings accounts for you - compare cash ISA or take a look at our best sellers accounts mortgages and savings

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.