Money Insider: Is this the start of a mortgage war?

I had to do a double take when I saw the new HSBC mortgage deals sitting in my inbox this week. The interest rate of 1.99 per cent made me do exactly what HSBC are hoping it will do for customers – it left me scrabbling around to find out more. And that's when I discovered that it's a great rate, but only if you've got at least a 40 per cent deposit to put down.

There's also a sizeable booking fee of £1,199 to consider, which equates to £50 per month over the two-year term of the deal. If you're looking to borrow 75 per cent of the property value, the rate is higher but still very competitive at 2.49 per cent plus the same fee.

It is virtually unheard of for a mortgage to be launched with a sub-two per cent interest rate and, for that reason alone, the level of demand is likely to mean that the offer won't be around for long.

Whilst many experts are predicting that base rate will stay low for the remainder of 2009 and early 2010, the medium- to long-term picture is less clear. The decision to opt for a variable rate mortgage or a fixed rate mortgage comes down to the amount of flexibility you have in your budget. With a variable rate you could end up getting a cheaper deal now, but there's always the risk that rates will increase – unfortunately, nobody really knows when or by how much. With a fixed rate, at least you know for certain how much will be coming out of your bank account each month for the duration of the mortgage term.

This aggressive move from HSBC will hopefully kickstart what has become a pretty stagnant mortgage market and it'll be interesting to see how other lenders respond.

Increased ISA allowance for the over 50s

From 6 October, ISA limits will be raised from £7,200 to £10,200 for anyone turning 50 on, or before, 5 April 2010. As part of this change, the savings element that can be put into cash ISAs is increasing from £3,600 to £5,100.

This week, Yorkshire Building Society announced that all of its ISA savers over 50 can add to their existing accounts, including those with fixed rate ISAs. The society has also taken the unusual step of allowing savers to top up existing fixed rate ISAs even though such accounts may no longer be available to the public.

Many people have questioned whether the Government thought through introducing the increased allowance for over 50s halfway through a tax year – it will have proved an expensive and logistical nightmare.

It is possible smaller building societies will find the cost implications prohibitive, and some savers will be unable to make use of the additional allowance with their provider and will have to transfer their custom elsewhere.

Showing support for elderly savers when savings rates were at rock bottom was something the Government had to take seriously, however, the financial benefit for savers doesn't add up to a life-changing amount.

Alistair Darling said it would "enable those who have retired or are beginning to prepare for retirement to move taxed savings into a tax-advantaged ISA, rewarding those who have saved by improving their returns".

The bottom line is that if you invest your extra £1,500 from October to April at an average rate of 3 per cent, your total interest return will be £22.50 whereas if it was in a taxable savings account you would have received £18, so the tax benefit only amounts to £4.50.

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

yourmoney@independent.co.uk

Suggested Topics
PROMOTED VIDEO
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    SQL Developer with T-SQL, Watford, Hertfordshire - £350 - £360

    £350 - £360 per day: Ashdown Group: SQL Developer with T-SQL, Watford, Hertfor...

    Chief Financial Officer

    120-150k: Accountancy Action: We are looking for an experienced CFO from a min...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Trainee Recruitment Consultant - Birmingham - Real Staffing

    £18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

    Day In a Page

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
    Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

    'Renée Zellweger's real crime was to age'

    The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
    From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

    Disney plans live-action remakes of animated classics

    From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
    Thousands of teenagers to visit battlefields of the First World War in new Government scheme

    Pupils to visit First World War battlefields

    A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
    The 10 best smartphone accessories

    Make the most of your mobile: 10 best smartphone accessories

    Try these add-ons for everything from secret charging to making sure you never lose your keys again
    Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

    Liverpool v Real Madrid

    Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
    West Indies tour of India: Hurricane set to sweep Windies into the shadows

    Hurricane set to sweep Windies into the shadows

    Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
    Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

    A new American serial killer?

    Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
    Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

    Sting to trap paedophiles may not carry weight in UK courts

    Computer image of ‘Sweetie’ represented entrapment, experts say
    Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

    Return to Fukushima – a land they will never call home again

    Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
    Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

    Wildlife Photographer of the Year

    Intimate image of resting lions claims top prize
    Online petitions: Sign here to change the world

    Want to change the world? Just sign here

    The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?