Melanie Bien: To back a winning deal, keep an eye on the rates

When it comes to our finances, we simply can't afford to be complacent. Shopping around for the best deal is a good start, but it should be just that - a start, rather than an exercise that's done once and then forgotten about.

When it comes to our finances, we simply can't afford to be complacent. Shopping around for the best deal is a good start, but it should be just that - a start, rather than an exercise that's done once and then forgotten about.

Once you've found that great mortgage rate, cheap car insurance or best price on your electricity, you need to return to it in a few months and check whether it's still as attractive as when you signed up. You can bet your bottom dollar it won't be - which is why it's so important to do this.

And with interest rates rising for the fifth time in 12 months last week to 4.75 per cent, there is plenty of movement in savings and mortgage rates, although perhaps not as much as there should be. Not all savings providers are as quick to pass on the full increase in the base rate to customers as mortgage lenders are to hike their rates by the full amount.

But in responding to the latest rate rise, a handful of savings providers were - unusually - quicker off the mark than the mortgage lenders. If providers react this quickly, it normally means they are getting something from the customer (ie, hiking mortgage rates) rather than giving something back.

Egg won the gold medal for a prompt reaction last Thursday, with an email that came through at 12.01pm, barely 60 seconds after the midday announcement from the Bank of England's Monetary Policy Committee. The internet bank announced that it is increasing its savings rate by the full 0.25 per cent.

Of course, Egg had no choice but to act, as it has guaranteed to match the base rate on its internet savings account until the end of 2007. But it still earns brownie points for acting so quickly. However, its customers will have to wait 10 days before the interest kicks in, whereas customers of Capital One's Tracker Plus account will get the full 0.25 per cent within five working days of Thursday's announcement.

If you are one of those people who has neither the time nor the inclination to monitor savings rates, and then switch again when they become uncompetitive, the answer is to choose a tracker account. The provider has no option but to increase the savings rate when the base rate goes up. But remember, when the base rate is moving the other way, it hurts to have a tracker because you will feel the full impact of rate cuts straight away.

Mortgage lenders usually increase rates fairly smartish after the base rate has gone up, but at the time of writing only Abbey had done so, passing on the full 0.25 per cent increase to borrowers. Most lenders tend to wait and see what the biggest lender, the Halifax, does, before shifting their own rates accordingly.

But if most lenders do increase their standard variable rates (SVRs) by the full 0.25 per cent, borrowers will find themselves in a worse position than when the base rate was last at 4.75 per cent. That was in September 2001, when the average SVR charged by lenders was 6.28 per cent, according to research from broker Savills Private Finance. If lenders pass on the full rise in the base rate this time around, as Abbey has already done, the average SVR will be 6.55 per cent.

So even though the base rate will be the same, the average SVR will be almost 0.3 per cent higher than three years ago.

With lenders clearly more than happy to line their own pockets, it is up to us to be vigilant. Friends complain to me that it is boring keeping an eye on their finances or they are simply too busy and have better things to do. But since when has saving money been a waste of time?

Ikea's little extra

A press release from the flat-pack specialist Ikea caught my eye. The retailer is going to charge customers 70p every time they make a purchase by credit card. Ikea defends the decision by saying that this is how much MasterCard and Visa charge it for transactions, and that it is simply passing the cost on to the third of customers who use this method of payment.

The new charge will save Ikea £3.5m a year, which it will use to slash the cost of its minimalist furnishings. It says the fee is modest, given that the average spend in one of its stores is £110. But in future, I'll be taking my Switch card.

m.bien@independent.co.uk

News
Susan Sarandon described David Bowie as
peopleSusan Sarandon reveals more on her David Bowie romance
Sport
Arsenal supporters gather for a recent ‘fan party’ in New Jersey
football
Sport
sportDidier Drogba returns to Chelsea on one-year deal
News
i100
PROMOTED VIDEO
Arts and Entertainment
The Secret Cinema performance of Back to the Future has been cancelled again
film
Life and Style
Balmain's autumn/winter 2014 campaign, shot by Mario Sorrenti and featuring Binx Walton, Cara Delevingne, Jourdan Dunn, Ysaunny Brito, Issa Lish and Kayla Scott
fashionHow Olivier Rousteing is revitalising the house of Balmain
Arts and Entertainment
Christian Grey cradles Ana in the Fifty Shades of Grey film
filmFifty Shades of Grey trailer provokes moral outrage in US
News
people
News
BBC broadcaster and presenter Evan Davis, who will be taking over from Jeremy Paxman on Newsnight
peopleForget Paxman - what will Evan Davis be like on Newsnight?
Life and Style
fashionCustomer complained about the visibly protruding ribs
News
newsComedy club forced to apologise as maggots eating a dead pigeon fall out of air-conditioning
Arts and Entertainment
Jo Brand says she's mellowed a lot
tvJo Brand says shows encourage people to laugh at the vulnerable
Life and Style
People may feel that they're procrastinating by watching TV in the evening
life
News
Tovey says of homeless charity the Pillion Trust : 'If it weren't for them and the park attendant I wouldn't be here today.'
people
Sport
Rhys Williams
commonwealth games
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

    Senior Risk Manager - Banking - London - £650

    £600 - £650 per day: Orgtel: Conduct Risk Liaison Manager - Banking - London -...

    The benefits of being in Recruitment at SThree...

    £18000 - £23000 per annum + Comission: SThree: SThree, International Recruitme...

    Test Analyst - UAT - Credit Risk

    £280 - £300 per day + competitive: Orgtel: Test Analyst, Edinburgh, Credit Ris...

    Trainee Recruitment Consultants - Banking & Finance

    £20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...

    Day In a Page

    Evan Davis: The BBC’s wolf in sheep’s clothing to take over at Newsnight

    The BBC’s wolf in sheep’s clothing

    What will Evan Davis be like on Newsnight?
    Finding the names for America’s shame: What happens to the immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert?

    Finding the names for America’s shame

    The immigrants crossing the US-Mexico border without documents who never make it past the Arizona desert
    Inside a church for Born Again Christians: Speaking to God in a Manchester multiplex

    Inside a church for Born Again Christians

    As Britain's Anglican church struggles to establish its modern identity, one branch of Christianity is booming
    Rihanna, Kim Kardashian and me: How Olivier Rousteing is revitalising the house of Balmain

    Olivier Rousteing is revitalising the house of Balmain

    Parisian couturier Pierre Balmain made his name dressing the mid-century jet set. Today, Olivier Rousteing – heir to the house Pierre built – is celebrating their 21st-century equivalents. The result? Nothing short of Balmania
    Cancer, cardiac arrest, HIV and homelessness - and he's only 39

    Incredible survival story of David Tovey

    Tovey went from cooking for the Queen to rifling through bins for his supper. His is a startling story of endurance against the odds – and of a social safety net failing at every turn
    Backhanders, bribery and abuses of power have soared in China as economy surges

    Bribery and abuses of power soar in China

    The bribery is fuelled by the surge in China's economy but the rules of corruption are subtle and unspoken, finds Evan Osnos, as he learns the dark arts from a master
    Commonwealth Games 2014: Highland terriers stole the show at the opening ceremony

    Highland terriers steal the show at opening ceremony

    Gillian Orr explores why a dog loved by film stars and presidents is finally having its day
    German art world rocked as artists use renowned fat sculpture to distil schnapps

    Brewing the fat from artwork angers widow of sculptor

    Part of Joseph Beuys' 1982 sculpture 'Fettecke' used to distil schnapps
    BBC's The Secret History of Our Streets reveals a fascinating window into Britain's past

    BBC takes viewers back down memory lane

    The Secret History of Our Streets, which returns with three films looking at Scottish streets, is the inverse of Benefits Street - delivering warmth instead of cynicism
    Joe, film review: Nicolas Cage delivers an astonishing performance in low budget drama

    Nicolas Cage shines in low-budget drama Joe

    Cage plays an ex-con in David Gordon Green's independent drama, which has been adapted from a novel by Larry Brown
    How to make your own gourmet ice lollies, granitas, slushy cocktails and frozen yoghurt

    Make your own ice lollies and frozen yoghurt

    Think outside the cool box for this summer's tempting frozen treats
    Ford Fiesta is UK's most popular car of all-time, with sales topping 4.1 million since 1976

    Fiesta is UK's most popular car of all-time

    Sales have topped 4.1 million since 1976. To celebrate this milestone, four Independent writers recall their Fiestas with pride
    10 best reed diffusers

    Heaven scent: 10 best reed diffusers

    Keep your rooms smelling summery and fresh with one of these subtle but distinctive home fragrances that’ll last you months
    Commonwealth Games 2014: Female boxers set to compete for first time

    Female boxers set to compete at Commonwealth Games for first time

    There’s no favourites and with no headguards anything could happen
    Five things we’ve learned so far about Manchester United under Louis van Gaal

    Five things we’ve learned so far about United under Van Gaal

    It’s impossible to avoid the impression that the Dutch manager is playing to the gallery a little