Andrew Hagger: Lenders pick up the pace on mortgage rates

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The Independent Online

There has been a distinct lack of excitement surrounding the Bank of England's decision not to change the base rate. The rate hasn't budged now since March, when it hit a record low of 0.5 per cent, the longest spell without a rate change since the summer of 2006.

Base rate may be stuck fast, but there was better news on the mortgage front this week with rates drifting slightly lower. First Direct launched a lifetime offset tracker at 2.79% (Base plus 2.29%) with a £999 fee for loans to a maximum of 60% loan to value (LTV).

For those with less equity available and who prefer the security of a fixed rate, Leek United is offering a two-year deal fixed at 3.59% with a £799 fee (max 75% LTV), and Newcastle Building Society an attractive looking 4.99% for five years with a fee of £995 (max LTV).

£100 sweetener to switch bank account

It is estimated that almost half of UK adults have never switched their bank account. Some may be happy with the service they receive, others may fear the transfer process is a complicated one. Others just can't be bothered, or don't have to the time to switch.

This week, Santander is offering a £100 "golden hello" if you transfer to the Abbey Preferred Overdraft Rate account or the Alliance & Leicester Premier current account. Both of these come with an interest-free overdraft facility for the first 12 months. First Direct, renowned for their award-winning customer service, is also prepared to offer you £100 if you transfer to their 1st Current Account. You will need to pay in at least £1,500 each month to qualify and, if you don't like their service, they will pay you £100 to transfer away again. So if you're fed up with your bank for whatever reason, why not do something about it this weekend – and get a cash bonus for your efforts.

PPI still kicking and screaming

The ongoing battle between the Office of Fair Trading, the Competition Commission and the banks regarding the sale of Payment Protection Insurance (PPI) has been rumbling on since early 2006, but it seems far from over. This week, Barclays (supported by Lloyds TSB Group and Shop Direct) challenged the decision that PPI shouldn't be sold at the same time that the loan is offered.

Whilst there is a place for PPI, as I'm sure many grateful consumers will vouch for during this period of high unemployment, its reputation has been tarnished as being poor value, inflexible and, in the past, has been sold to people who were ineligible to claim.

Lenders won't let go of this multi-million pound revenue stream without a fight, however the situation may not have arisen if some of the big high-street names hadn't been charging their customers almost three times as much for similar PPI cover that was available from specialist independent insurance providers.

The hugely unpopular "single premium" PPI was outlawed by the Financial Services Authority in May this year with the point-of-sale ban due to come into force in October 2010.

The result of this appeal won't be heard until later this year, but consumer action groups and the lenders will no doubt be watching closely.

Andrew Hagger is a money analyst at Moneynet.co.uk

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