fear of finance

Ken Clarke's interest rate increase, like the housemaid's baby, is only a small one, but it is definitely an increase, and in the nature of these things it is likely to be only the first of a family of rate rises over the next two years while the economy takes time to respond to the signal and slows down from what the Chancellor now sees as an unsustainable growth.

Recorded cases of a trend being reversed after just one move are rare indeed, and 7 per cent looks likely by the end of next year.

But unlike the housemaid, the Chancellor will expect to enhance his reputation for prudence, probity and putting duty before pleasure and political opportunism.

That will last at least until the Budget, when the cynics now believe he will use his new-found reputation for monetary rectitude to justify some fiscal laxity, in the shape of tax cuts which could not otherwise be delivered without risking a run on sterling. If he holds back on tax cuts now, he really will be a candidate for sainthood.

But credit where it is due. He has done a remarkable job in sustaining the recovery, which looked like faltering in 1994, without having to put rates up until now, but the Prime Minister has never been able to call the election on the back of the recovery and the Chancellor has finally been forced to concede an upturn in rates with the election still seven months away.

In the short run, the first rise in interest rates for two years is unlikely to have much immediate impact on personal borrowers or investors.

The link between base rates and borrowing and lending rates is not as immediate as it used to be. The big mortgage lenders have been quick to assure borrowers that they have no plans to raise their standard variable mortgage rates, and there have been few immediate changes in rates offered to investors.

The most immediate beneficiaries will be investors who have treasury accounts with merchant bankers Close Brothers.

The minimum investment is pounds 50,000 and the interest is automatically linked to rates in the London inter-bank market.

It pays out the bid rate, which is 0.125 per cent below the offer rate, but it is automatically reset each month and from yesterday the rate has jumped to 61/16 per cent.

Other changes are few and far between as our weekly table from MoneyFacts (left) confirms. But we have now entered a period of phoney war on interest rates.

Nothing dramatic is happening and this week's rise in rates alone is unlikely to kill the recovery in the housing market.

Demand for mortgages remains relatively low, if only because there is a shortage of houses for sale, but overall demand for credit is rising and competition for savings will certainly push rates up the next time base rates move.

They might not rise a full 50 basis points (0.5 per cent) next time, but some adjustments are inevitable next time bases rates go up.

Meanwhile with base rates set to be above current levels for two, maybe three more years, existing fixed rate mortgage offers up to the end of the century at least will look increasingly attractive.

These offers may be exhausted and replaced by progressively higher rates.

Clifford German

Best borrowing rates

Telephone % Rate and Max Fee Incentive Redemption period adv % penalty

MORTGAGES

Fixed rates

Scarborough BS 0800 590547 0.20 for 1 year 85 0.75% - 1st 5 yrs:7.04% of sum repaid

Newcastle BS 0191 244 2468 6.49 to 1/1/00 95 pounds 295 - To 1/1/03: 5% of advace

Northern Rock BS 0800 591500 7.24 to 1/1/02 95 pounds 295 - 1st 6 yrs: 5% of sum repaid

Variable rates

Scarborough BS 0800 590547 0.65% for 1 year 90 - - 1st 5 yrs:6.33% of sum repaid

Principality BS 01222 344188 3.50% to 1/11/98 75 - - To 30/10/01: discount reclmd

Northern Rock BS 0800 591500 4.24% to 1/1/00 95 Refund valn fee 1st 7 yrs: 5% of sum repaid

First time buyers fixed rates

Alliance & Leic BS via local branch 2.10 to 1/10/97 95 0.5% - To 1/10/01: 6 mths interst

Northern Rock BS 0800-591500 4.49 to 1/1/99 95 pounds 295 ___ 1st 6 yrs: 5% of sum repaid

Cheltenham & Glou 0800 272131 7.25 for 5 years 95 pounds 495 Free valuation 1st 6 yrs: 6 mths int

First time buyers variable rates

Principality BS 01222 344188 1.00 to 1/11/97 90 - - To 31/10/01: discount reclmd

Greenwich BS 0181 8588212 3.49% for 2 years 95 pounds 250 - 1st 5 yrs: discount reclaimed

Northern Rock BS 0800 591500 5.24% to 1/1/02 95 - Refund valn fee 1st 7 yrs: 5% of sum repaid

PERSONAL LOANS

Telephone APR % Max LTV Fixed monthly payments (pounds 3,000 over 3 years)

Unsecured With insurance Without insurance

Northern Rock BS 0345 421421 12.9H pounds 112.66 pounds 102.59

Direct Line 0141 2489966 13.9E pounds 112.86 pounds 101.33

Nationwide BS via local branch 14.9 pounds 113.15 pounds 102.49

Secured (second charge) Max LTV Advance Term

Clydesdale Bank 0800 240024 7.5 Neg pounds 3K - pounds 15K 6 mths to 25 years

Royal B of Scotland 0131 523 7023 8.7 70% pounds 2.5K-pounds 100K 3 years to retirement

Barclays Bank 0800 000929 9.3/9.6 80% pounds 10K-pounds 75K 5 to 25 years

OVERDRAFTS

Authorised Unauthorised

Telephone Account % pm APR % pm APR

Woolwich BS 0800 400900 Current 0.76 9.5 2.18 29.5

Alliance & Leicester 0500 959595 Alliance 0.76 9.5 2.20 29.8

Abbey National 0500 200500 Current 0.94 11.9 2.18 29.5

CREDIT CARDS

Telephone Card Type Min Rate APR Annual Int. free Income % pm % Fee period

Standard

Co-operative Bank 0800 109000 Advantage Visa - 0.64N 7.90N nil 0 days

Robert Fleming/S&P 0800 829024 MasterCard/Visa - 0.9167 11.50 nil 0 days

RBS Advanta 0800 077770 Visa - 0.94N 11.90N nil 56 days

Gold cards

Co-operative Bank 0345 212212 Visa pounds 20,000 0.50 10.50 pounds 120 46 days

RBS Advanta 0800 077770 Visa pounds 20,000 0.94N 11.90N nil 56 days

Royal B of Scotland 01702 362890 Visa pounds 20,000 1.05N 14.50N pounds 35 46 days

STORE CARDS

Telephone Payment by direct debit Payment by other methods % pm APR % pm APR

John Lewis via store 1.39 18.0 1.39 18.0

Marks and Spencer 01244 681681 1.87 24.8 1.97 26.3

Sears via store 1.94 25.9 2.20 29.8

Best savings rates

Telephone number

Account

Notice or term

Deposit

Rate %

Interest interval

INSTANT ACCESS

Portman BS 01202 292444 Instant Access Instant pounds 100 4.50 Year

Co-0perative Bank 0345 252000 Pathfinder Instant pounds 5,000 4.75 Month

Direct Line 0181 667 1121 Instant Savings Instant pounds 10,000 5.50 Year

Direct Line 0181 667 1121 Instant Savings Instant pounds 50,000 5.75 Year

INSTANT ACCESS POSTAL ACCOUNTS

Teachers' BS 01202 887171 Bullion Postal pounds 500 4.80 1/2 Year

Alliance & Leic BS 0645 228858 Instant Direct Postal pounds 5,000 5.40 Year

Bristol & West BS 0800 901109 Instant Acess Postal Postal pounds 10,000 5.85 Year

Bristol & West BS 0800 901109 Instant Acess Postal Postal pounds 25,000 6.05 Year

NOTICE ACCOUNTS & BONDS

Chelsea BS 0800.132351 POST-Tel 20 Day 20 day P pounds 5000 6.05 Year

Chelsea BS 0800 132351 POST-Tel 20 Day 20 day P pounds 25,000 6.30 Year

Cheltenham & Glouc 0800 717505 Direct 30 30 day P pounds 100 5.50 Year

National Counties BS 01372 747771 Direct 90 90 day pounds 50,000 6.50 Year

CHEQUE ACCOUNTS

Kleinwort Benson 01202 502404 HICA Instant pounds 2,500 5.00 Month

Halifax BS 01422 335333 Asset Reserve Instant pounds 10,000 4.00 Quarter

Chelsea BS 0800 717515 Classic Postal Instant pounds 10,000 4.35 Year

Chelsea BS 0800 717515 Classic Postal Instant pounds 25,000 4.65 Year

FIXED RATE BONDS

Birmingham Midshires 0645 720721 Fixed Rate Bond 1 Year pounds 5,000 6.30F Year

Yorkshire BS 0800 378836 Fixed RateBond 31/3/98 pounds 5,000 6.60F Maturity

Leeds & Holbeck BS 0113 225 7777 Fixed Rate Bond 2 Year pounds 1,000 6.85F Year

Coventry BS 0345 665522 Fixed Rate Bond 30/11/99 pounds 1,000 7.30F Year

FIRST TESSAS

Sun Banking Corp 01438 744505 Fixed Rate TESSA 5 years pounds 8,575 7.30F Year

NatWest Bank 0800 200400 Fixed Rate TESSA 5 years pounds 5,000 7.45F Year

Birmingham Midshires 0645 720721 5 years pounds 1,000 7.00 Year

Principality BS 01222 344188 5 years pounds 500 6.80 Year

FOLLOW-ON TESSAS

West Bromwich BS 0121 607 2415 Fixed Rate TESSA 5 years pounds 3,000 7.45F Year

NatWest Bank 0800 200 400 Fixed Rate TESSA 5 years pounds 5,000 7.45F Year

National Counties BS 01372 747771 5 years pounds 9,000 7.20 Year

Birmingham Midshires 0645 720721 Inflation Beater 5 years pounds 1,000 7.00 Year

GUARANTEED INCOME BONDS (net)

Premium Life 0800 838020 1 year pounds 10,000 5.05FN Year

Premium Life 0800 838020 2 year pounds 10,000 5.45FN Year

Pinnacle Insurance 0181 207 9007 3 years pounds 3,000 5.60FN Year

Pinnacle Insurance 0181 207 9007 4 years pounds 3,000 5.85FN Year

AIG Life (UK) 0181 680 7172 5 years pounds 50,000 6.15FN Year

OFFSHORE ACCOUNTS (gross)

N'castle Bank Gibraltar 00 350 76168 Nova Access Instant pounds 25,000 6.30 Year

Northern Rock Guern 01481 714600 Offshore 30 30 day pounds 25,000 6.35 Year

Derbyshire (IOM) Ltd 01624 663432 90 Day Notice 90 Day pounds 25,000 6.55 Year

Northern Rock, Guern 01481 714600 Millennium Bond 1/1/00 pounds 10,000 7.50F Year

NATIONAL SAVINGS ACCOUNTS (gross)

Investment Accounts 1 month pounds 20 4.75 Year

pounds 500 5.25 Year

pounds 25,000 5.50 Year

Income Bonds 3 months pounds 2,000 6.00 Month

pounds 25,000 6.25 Month

Capital Bond Series J 5 years pounds 100 6.65F Maturity

First Option Bonds 12 months pounds 1,000 6.00F Year

pounds 20,000 6.25F Year

Pensioner's G'teed Income Bond Series 3 5 year pounds 500 7.00F Month

NS Certificates (tax-free) 43rd issue 5 year pounds 100 5.35F Maturity

9th Index linked 5 year pounds 100 2.50+rpi Maturity

Children's Bond Issue H 5 year pounds 25 6.75F Maturity