For one month only: financial bargains we just can't resist

Special offers: The banks' New Year sales are in full swing, says Esther Shaw, but are they a 'gimme' or a gimmick?
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The Independent Online

The January sales can be hard to resist: all those discounted clothes and electronic goods.

Retailers know they can get us to make purchases we don't really want or need while enabling them to clear old stock. Now banks are trying to do something similar with financial products such as mortgages, credit cards and savings accounts.

If you've walked past a branch of HSBC in recent days, you may have seen a bright red "sale" sign hanging in the window; the bank has also been advertising on television.

HSBC claims it is "offering great deals and discounts on a range of personal finance products", while pledging to give customers a chance to help save the Brazilian rainforest by donating 2 to the environmental charity WWF for each product bought in its sale.

HSBC has held a New Year sale since 2005 and now other banks, such as NatWest, and even the odd building society, are following suit.

"They're anxious to use the 'sale' to hook in customers, and the objective will be to cross-sell other services," says Louise Cuming, head of mortgages at price-comparison service Moneysupermarket.com. "As with the retail industry, products on sale are often 'loss leaders' to get the customer to buy something else where profit margins are much higher."

So are these New Year deals good value or just gimmicks? As part of its promotion, HSBC is offering a two-year discount mortgage with an interest rate of 4.99 per cent 1.76 percentage points less than its standard variable rate (SVR) of 6.75 per cent.

According to Melanie Bien from broker Savills Private Finance, while many "savings" in the January sales cover up less than competitive deals, HSBC's mortgage offer is "actually an attractive rate".

However, she points out that there is a hefty 1,999 upfront fee, and with a discounted product, borrowers are at the mercy of the lender each time the base rate changes.

Ms Cuming also warns: "Although the deal is currently very competitive, that is not guaranteed, and future [Bank of England base] rate decreases may not be passed on in full."

Likewise, Leeds building society's "January only" offer should be approached with caution.

"Like HSBC's deal, the offer applies to just one mortgage from its range its 5.4 per cent two-year fixed rate," says Ms Bien.

The completion fee on this product is down from 999 to 299 and there is a free standard property valuation of up to 335, but the mortgage is offered only up to 80 per cent loan to value.

And Ms Bien adds that a fixed rate may not appeal just now, since at least one more cut in the base rate is forecast in the coming months. If you do need a fix, she says, there are better deals available: First Direct, for example, has a two-year fix at 4.99 per cent, with a 1,498 fee.

Alongside its mortgage promotion, HSBC is offering new credit card customers 0 per cent interest on purchases for 12 months and a rate of 2.9 per cent on balance transfers until January 2010. There are also "half-price offers" on its Plus current account and "special offers" on share dealing and insurance as well as several savings deals.

But Lisa Taylor from financial analyst Moneyfacts points out that while HSBC is offering a one-year fixed-rate savings bond at 5.75 per cent gross, this appears uncompetitive when compared with offerings such as that from Bradford & Bingley, which is paying 6.8 per cent on its equivalent one-year bond. "HSBC's other savings offers also seem far less than market-leading even if you include the bonus," she adds.

The message is to look beyond any sale offer.

"In general, a financial sale is a gimmick," says Ms Taylor. "Sale products often have limited appeal or availability, and the deal may be restricted to larger loans, packaged current accounts or even only to existing or new customers. Just because a product is on sale, there are no guarantees you are getting a bargain."

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