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

    Recruitment Genius: Software Development Manager

    £40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

    Ashdown Group: Product Manager - (Product Marketing, Financial Services)

    £30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

    Recruitment Genius: Compliance Assistant

    £13000 per annum: Recruitment Genius: This Pension Specialist was established ...

    Ashdown Group: Market Research Executive

    £23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

    Day In a Page

    As in 1942, Germany must show restraint over Greece

    As in 1942, Germany must show restraint over Greece

    Mussolini tried to warn his ally of the danger of bringing the country to its knees. So should we, says Patrick Cockburn
    Britain's widening poverty gap should be causing outrage at the start of the election campaign

    The short stroll that should be our walk of shame

    Courting the global elite has failed to benefit Britain, as the vast disparity in wealth on display in the capital shows
    Homeless Veterans appeal: The rise of the working poor: when having a job cannot prevent poverty

    Homeless Veterans appeal

    The rise of the working poor: when having a job cannot prevent poverty
    Prince Charles the saviour of the nation? A new book highlights concerns about how political he will be when he eventually becomes king

    Prince Charles the saviour of the nation?

    A new book highlights concerns about how political he will be when he eventually becomes king
    How books can defeat Isis: Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad

    How books can defeat Isis

    Patrick Cockburn was able to update his agenda-setting 'The Rise of Islamic State' while under attack in Baghdad
    Judith Hackitt: The myths of elf 'n' safety

    Judith Hackitt: The myths of elf 'n' safety

    She may be in charge of minimising our risks of injury, but the chair of the Health and Safety Executive still wants children to be able to hurt themselves
    The open loathing between Barack Obama and Benjamin Netanyahu just got worse

    The open loathing between Obama and Netanyahu just got worse

    The Israeli PM's relationship with the Obama has always been chilly, but going over the President's head on Iran will do him no favours, says Rupert Cornwell
    French chefs get 'le huff' as nation slips down global cuisine rankings

    French chefs get 'le huff' as nation slips down global cuisine rankings

    Fury at British best restaurants survey sees French magazine produce a rival list
    Star choreographer Matthew Bourne gives young carers a chance to perform at Sadler's Wells

    Young carers to make dance debut

    What happened when superstar choreographer Matthew Bourne encouraged 27 teenage carers to think about themselves for once?
    Design Council's 70th anniversary: Four of the most intriguing prototypes from Ones to Watch

    Design Council's 70th anniversary

    Four of the most intriguing prototypes from Ones to Watch
    Dame Harriet Walter: The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment

    Dame Harriet Walter interview

    The actress on learning what it is to age, plastic surgery, and her unease at being honoured by the establishment
    Art should not be a slave to the ideas driving it

    Art should not be a slave to the ideas driving it

    Critics of Tom Stoppard's new play seem to agree that cerebral can never trump character, says DJ Taylor
    Bill Granger recipes: Our chef's winter salads will make you feel energised through February

    Bill Granger's winter salads

    Salads aren't just a bit on the side, says our chef - their crunch, colour and natural goodness are perfect for a midwinter pick-me-up
    England vs Wales: Cool head George Ford ready to put out dragon fire

    George Ford: Cool head ready to put out dragon fire

    No 10’s calmness under pressure will be key for England in Cardiff
    Michael Calvin: Time for Old Firm to put aside bigotry and forge new links

    Michael Calvin's Last Word

    Time for Old Firm to put aside bigotry and forge new links