Five minute finance: Savings and mortgages - Savings - News |

News News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

Five minute finance: Savings and mortgages

Five minute finance: Savings and mortgages

Category: Savings

Updated: 26/04/2010
First Published: 26/04/2010

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 It is now over 6 months old so the content may be out of date.

Figures released last week saw the Consumer Price Index, the Government's target measure of inflation, rise more than expected to 3.40pc. The news is another bitter blow to savers who continue to struggle to find a savings account paying a rate which can combat the effects of both tax and inflation.

In order to stop their savings pot effectively eroding away, a basic rate tax payer needs to find an account paying 4.25pc, a level that is available on just 1.9pc of accounts on the market. Higher rate tax payers need to earn at least 5.64pc, which is only achievable on 0.2pc of accounts on the market.

Unfortunately for savers, the majority of the accounts that do pay a rate high enough to compensate for negative impact of tax and inflation come with strings attached. In order to qualify for the majority of these deals, savers have to open a riskier longer term investment product at the same time, or are required to hold or open the provider's current account.

These linked products are not suitable for the majority of savers, leaving fixed rate bonds as the only option available to achieve the necessary level of return. Furthermore, funds will need to be committed for a term of at least three years in order to secure the rate required. With bank rate likely to rise in the coming years, many savers are not looking for such a long term commitment.

Premier league account

Manchester Building Society has just launched a new issue of its Premier Instant account paying 2.66pc. The account is open to new customers and unlike the majority of other top paying accounts, it does not include a temporary bonus in the rate, which would reduce the return payable when the bonus period ends. Savers can invest between £1,000 and £50,000 into the account, which is operated in branch or by post. Further additions can be made to the account until the 17 May 2010. Savers can get instant access to their money, but a maximum of four withdrawals is permitted per annum.

Bonus boost rate

New customers to ING Direct UK have been given a boost, after the provider increased the rate payable on its Savings Account. The account now pays 2.72pc, including a 2.22pc bonus for 12 months and guarantees to pay no lower than 2.72pc during the first year. Savers can invest up to £1m into the account, which is operated online or by telephone. No notice is required to make a withdrawal, but all transactions must be made via a nominated account.

Fix and track with HSBC

Borrowers facing the decision whether to opt for a fixed rate or tracker mortgage are being offered the best of both worlds by HSBC, who have launched a split loan mortgage. The rate charged will vary depending on the size of the deposit and the proportion of the mortgage the borrower wishes to fix. Borrowers with 25pc deposits, looking to fix the rate on a quarter of their mortgage for two years, are being offered a rate of 2.49pc. The remaining three quarters of the mortgage is a tracker, currently charging 2.49pc. The deal is available on mortgages up to £500,000 and a £999 booking fee is payable.

Lloyds rewards loyalty

Lloyds TSB is rewarding its current account customers by offering them a 0.20pc discount on its mortgages. The offer is available to customers taking a new mortgage deal, who fund their current account with at least £1,000 per month. Borrowers with a £150,000 repayment mortgage, opting for the 3.99pc two year fixed deal from Lloyds TSB could save nearly £400 over the term of the deal.

Sainsbury's cuts loan rates

Sainsbury's Finance has cut its loan rates for the second time this month. Customers looking to borrow between £7,500 and £14,999 are being offered a typical rate of 7.8pc, the lowest rate on the market. Loans of between £1,000 and £25,000 are available and Sainsbury's Finance offers some of the most competitive rates across all tiers. The loan is open to Nectar Card customers only, but this can be applied for at the same time as the loan.

Find the best savings account for you - Compare best selling savings accounts

Find the best mortgage for you - 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.