Money Insider: Is this is as good as it gets for borrowers?


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The Independent Online

For almost five years we've had a record low base rate of 0.5 per cent, but is the era of low-cost credit now at a crossroads, with predicted rate rises on the horizon?

Consumers with a good credit history have never had it so good when it comes to borrowing money, with mortgage and personal loan rates at record lows and interest-free terms on credit card balance transfers and purchases getting longer by the month.

The last 10 days have been no exception, with another wave of cheap credit deals being offered by a range of providers.

Nationwide Building Society shook the credit card market last week with a fantastic credit card deal.

The UK's biggest building society offered 26 months interest free for credit card customers, nothing too spectacular in that you may think with a number of cards offering 29-31 months at 0 per cent, however the balance transfer fee is just 0.75 per cent, which is about a quarter of what most card companies charge.

Switching £4,000 to one of the Nationwide Building Society credit cards will cost you a one-off fee of just £30 rather than the whopping £115 to £120 levied by most other lenders.

This radical move is likely to provoke reaction from rival card companies eager to recruit new customers.

On the personal loans front rates are being trimmed too, with Santander announcing a new low rate of 4.5 per cent APR for amounts between £7,500 and £15,000 and up to £20,000 for Santander 123 customers.

The supermarket banks have been lowering loan costs too as competition remains fierce – Tesco Bank has cut the rate from 4.9 per cent to 4.6 per cent APR for loans of £7,500 to £15,000 while Sainsbury's Bank is offering 4.5 per cent APR for the same sums as long as you repay within 36 months.

The UK economy is picking up and people are spending and borrowing more as confidence starts to return, however, the current low-rate environment we have now may be about as good as it gets as the mumblings about higher interest rate costs are starting to increase.

Earlier this month, Martin Weale, a key member of the Bank of England's rate-setting Monetary Policy Committee, suggested that interest rates may rise as soon as spring 2015, so if you've got a major purchase in mind it makes sense to take advantage the most of the current finance deals while you still can.

Don't give up on savings

Increasingly, I'm hearing people questioning the benefit of saving money in a cash ISA, saying they don't see the point when savings interest rates are so low.

It's not surprising, as below average interest rates and niggling inflation have made it difficult for savers to maintain the spending power of their nest egg in recent years.

It's easy to see why some may dismiss an ISA as hardly worth the effort, with a basic rate taxpayer currently better off by £20.16 per year based on the maximum cash sum of £5,760 in the best variable rate ISA deal paying 1.75 per cent.

Admittedly it doesn't sound a great deal, but it's more about looking at the cumulative effect of long-term ISA saving.

For example if you were to save £5,760 every year for the next 10 years, even assuming that rates stays at the same level you will earn £5,504 in interest over that time and save yourself £1,100 in tax – you'll also have built up a balance of £63,104.

It's all about taking a longer term view and being in a position to reap increased rewards when savings rates eventually pick up.

Andrew Hagger is an independent personal finance analyst from

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