Money Insider: Lending drive is delivering red-hot offers

Mortgage lenders are falling over themselves to feature in the best buy tables, and with the help of the Bank of England's Funding for Lending Scheme are now offering some head-turning deals.

With First Direct launching a five-year fixed rate at 2.99 per cent and Tesco Bank a two-year fixed mortgage at 1.99 per cent in the past week, there's a growing case for moving away from your current lender's Standard Variable Rate and locking into one of these low-rate home loans.

Unfortunately these hot mortgage products are only available to borrowers with a sizeable stake to put down, and in the case of First Direct's 2.99 per cent deal you can borrow only 65 per cent of the property value.

Even though the First Direct mortgage has a hefty-looking fee of £1,999, because it is spread over five years and the rate has come down from 3.79 per cent the mortgage still works out £2,336 cheaper over five years, or £39 a month, for someone with a 25-year, £150,000 mortgage.

It's not just the established lenders offering these more competitive mortgages; some of the new providers are weighing in with some aggressive price cuts too.

When Tesco launched its first range of mortgage products, it was met with a muted response from the media amid claims that it was not competitive enough with the established players.

Since its debut in the mortgage market on 6 August, the supermarket bank has really raised its game and the latest rate cuts will give its high street rivals something to think about.

This is the third set of rate reductions in a little over six weeks, with the latest round on the back of the Tesco bank's application to join the Funding for Lending Scheme.

The sub-2 per cent rate for the 60 per cent LTV two-year fixed deal is the mortgage that will grab all the headlines, with the rate cut by 0.65 per cent and £300 shaved off the product fee just ten days after it was originally launched.

The two-year fix at 70 per cent LTV is another deal worth mentioning – the rate on this product has been cut by 0.8 per cent from 3.19 per cent at launch to 2.39 per cent today.

This 0.8 per cent reduction for someone looking for a £150,000 mortgage (25-year term) will cut the monthly repayment cost by £61, from £726 to £665 a month, amounting to a saving of £1,464 over the two-year term – the equivalent of more than two monthly repayments.

It's excellent news for consumers that the Bank of England's scheme is driving mortgage costs down, but it's also disappointing that we are not seeing more of this frenzied activity at 80 per cent LTV and above, where it would really have an impact.

Forget the zero heroes for your credit card

The balance transfer segment of the credit card market continues to get the most coverage and dominate the best buys, but more suitable, good value long-term alternatives are being missed by consumers.

If you're looking for a new credit card, all the adverts and newspaper best buys will point you towards the longest 0 per cent deals on the market. While interest-free plastic can save you a small fortune in interest costs if used wisely, there are also some very solid all round credit cards on the market that rarely get a mention due to the blinkered focus on zero per cent balance transfers. You can get 22 months-plus terms on free credit on balance transfers, but rates when the introductory deal ends can be almost 20 per cent APR.

If you take advantage of the 0 per cent period then move on to another card and repeat the process it makes financial sense, but for a card for the longer term there are alternatives with a much lower rate. Halifax Clarity (12.9 per cent APR), MBNA Everyday (11.9 per cent ), Nationwide BS Select (12.9 per cent ) and Sainsbury's Bank Gold (9.9 per cent) won't top the best buys, but offer a long-term interest rate well below the market average 18 per cent.

Andrew Hagger is an independent personal finance analyst from www.moneycomms.co.uk