Money Insider: Crumbs of comfort for savers after a miserable year

it's now well over three years since the banking crisis first took hold and TV news programmes caused widespread panic, showing hundreds of people queuing outside branches of Northern Rock to withdraw their cash.

A degree of calm and order may well have been restored across the banking industry since then, but the repercussions of the crisis are still there for all to see and have made it another miserable year for borrowers and, even more so, for savers.

Base rate appears to be welded in place at a record low 0.5 per cent, a level from which it hasn't budged since March 2009. Savers are still struggling to find a decent return, even in the fixed-rate savings market, where rates have continued to edge lower throughout 2010.

For mortgage borrowers it's been almost a case of two distinctly separate markets, one for the haves and one for the have-nots, based upon whether you have a 25 per cent or greater deposit at your disposal.

2010 has seen some excellent mortgage deals for those with only a 60 per cent LTV requirement, with five-year fixed rates as low as 3.89 per cent and £99 fee from First Direct.

Unfortunately, if you've only got a 10 per cent stake then the mortgage market will not be welcoming you with open arms. Increased reserve requirements for high LTV mortgages mean rates are much higher, even for those lucky enough to pass the ultra tough lending criteria.

We saw a radical shake-up of the political landscape this year and the new Coalition Government didn't waste any time in abolishing Child Trust Funds (CTFs) as part of the spending cuts, a move they said would save £520m. This was a hammer blow to the children's savings market, although the Treasury announced in October that a "junior" Individual Savings scheme will be introduced in the autumn of 2011. There is little detail available regarding this new tax-free savings initiative, but you can bet your bottom dollar there won't be any CTF-style state funding on offer from our cash-strapped government.

Looking forward to next year, activity in the housing and mortgage markets looks set to remain broadly flat, according to the Council of Mortgage Lenders. With public sector spending cuts hindering an already difficult jobs market, and many households making efforts to reduce levels of indebtedness, I think that demand for mortgages may stagnate for some time yet.

Interest rates are expected to remain flat in 2011, according to many industry experts, and if so it will mean that remortgaging volumes will remain subdued. First-time buyers are also expected to continue to find it difficult to enter the market, with the thought of finding even a 10 per cent deposit virtually a non-starter for many.

It's not all bad news, though: for example, there are a couple of changes within the credit card market that will offer greater protection to consumers. Media pressure eventually saw the Government and credit card providers agree upon a number of rule changes that will improve the position of credit card customers starting in 2011.

The most important rule change will affect the way plastic debts are paid off. Traditionally, the vast majority of credit card companies allocated monthly payments to the cheapest debt first, otherwise known as "negative payment hierarchy", a much criticised practice which proved a great money spinner for the card companies.

If you transferred a balance to a 0 per cent card but later spent on the same card, repayments would be used to clear the transferred interest-free balance, leaving interest to pile up on the purchases spend.

Come January 2011, card companies will have to settle the most expensive debt first, leading to a much fairer "positive payment hierarchy".

There will also be rule changes regarding the level of minimum payments. New customers will have to repay a minimum sum, comprising interest, fees and charges plus 1 per cent of their statement balance, to encourage repayment of debt more quickly. Some of the existing minimum repayment levels are so low that debts, particularly where interest rates are high, can take more than 10 years to repay.

A crumb of comfort for savers in 2011 is that the ISA tax-free allowance will increase by £480 per year with effect from 6 April. The rise, based upon RPI of 4.6 per cent in September 2010, means that even if you're only interested in cash-based tax-free savings, you'll still benefit, with your allowance rising from £5,100 to £5,340.

Until base rate rises the new year is unlikely to deliver much for savers to smile about in the way of better rates. We can only hope that new players such as Virgin Money and Tesco Bank eventually flex their muscles in the banking market and hit the high street with some innovative and competitive new offers.

Andrew Hagger is a money analyst at

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