Money Insider: The banking sector needs some fresh blood

New banks, a breath of fresh air or more of the same? Financial news has this week been dominated by the EU-enforced break-up of Lloyds TSB and Royal Bank of Scotland, which sees these banking heavyweights having to dispose of hundreds of branches.

When you throw the proposed sale of the Northern Rock "good bank" into the mix, there's an array of established high-street outlets ripe for rebranding. The biggest players in the financial services industry have had it their own way for too long, relying on an apathetic customer base which is prepared to tolerate average products and customer service. These providers have become increasingly complacent as the level of competition has dwindled. One reasons that, reportedly, more than half of bank customers don't switch accounts is the perception that things will be no better.

Let's hope this shake-up brings some much needed fresh new blood to the banking sector, offering simple well-priced products, and giving customers something other than another shade of beige to choose from. A simple ethos where consistently competitive rates, backed by excellent levels of customer service is the formula that could win over a decent share of the personal finance audience. The ideal scenario is that we see some innovative new players capable of balancing shareholder and customer expectations while convincing us they represent a credible alternative.

Fixed-rate savings with a get out if you need it: The fixed rate savings market has been a little more subdued during the last few days, possibly still reeling from last week's assault on the best buy tables by National Savings & Investments. If you're happy to tie your savings up for three years, Birmingham Midshires this week launched an impressive fixed rate of 4.65 per cent AER. While the rate sits just below the market leader for this term, namely ICICI Bank UK at 4.7 per cent AER, the Birmingham Midshires bond comes with the added flexibility of allowing you to access your savings early subject to 90 days loss of interest.

First-time buyers back in the spotlight: The virtual freeze on mortgage products for first-time buyers showed signs of a slight thaw this week with new products and creative initiatives from the building society sector.

Nationwide Building Society is offering mortgages to 90 per cent loan-to-value for holders of its Flex Account.

While pricing is dependent on underwriting and individual circumstances, there are two year fixed rates available from 5.98 per cent plus fees totalling 495. There are also slightly more expensive three and five year options of this first-time buyer house purchase loan priced at 6.03 per cent and 6.73 per cent respectively, both with a 995 fee.

If you'd prefer not to fix in the current climate, there's also a two year tracker available at 4.63 per cent (base rate plus 4.13 per cent) again with a 995 fee.

While the rates still appear high when compared with mortgages that require a higher deposit, at least we're starting to see some competition in a market where would-be homebuyers, have until recently, had little or no choice.

Of the deals on the table the Nationwide BS 5.98 per cent two year fix is now a best buy, just nudging HSBC at 5.99 per cent with 599 fee into a close second place. If a longer term fix appeals, then HSBC comes out on top over five years at 6.49 per cent with a 599 fee.

Bath Building Society this week launched two new first-time buyer products, a Parent Assisted Mortgage (PAM) and a "Buy for Uni" mortgage. The PAM, available with a 10 per cent deposit, requires a guarantee and a charge over the parental property for advances over 80 per cent loan-to-value. The rate is 5.46 per cent variable (a standard variable rate of 5.1 per cent plus 0.36 per cent) plus a fee of 0.5 per cent of the advance, minimum 599. There's an early repayment charge payable during the first three years.

The "Buy for Uni" mortgage is for parents wanting to buy a property for children. Loans to 100 per cent are available, but the property must be within 10 miles of the university and borrowing over 75 per cent of the value of the property will require a supported guarantee from parents. Go to www.bibs.co.uk

Andrew Hagger is a money analyst at Moneynet.co.uk