Rates you can bank on

Attractive deals are on offer for those who want to remortgage or take out an ISA
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The Independent Online

The Bank of England's decision last week not to increase interest rates is good news for the consumer. Fears that the Chancellor's pre-Budget report might have panicked the Monetary Policy Committee into raising rates proved premature. A move would have been unlikely, in any case, considering that the committee met only the following day.

The Bank of England's decision last week not to increase interest rates is good news for the consumer. Fears that the Chancellor's pre-Budget report might have panicked the Monetary Policy Committee into raising rates proved premature. A move would have been unlikely, in any case, considering that the committee met only the following day.

Interest rates have remained at 6 per cent for the past nine months, generating a sense of stability in the financial services industry. So now could be a good time to review your finances and see where the best mortgage, savings and investment deals are.

Michael Owen, director of the independent financial adviser Plan Invest Group, suggests we look at three main areas: mortgages, individual savings accounts (ISAs) and fixed savings accounts.

"Mortgages are the big one at the moment," says Mr Owen. "Far too many people, simply out of indifference, are sitting on a variable rate mortgage when they could be looking at other options which would save them considerable amounts of money."

Remortgaging is increasingly popular. Figures from the Council of Mortgage Lenders show remortgages accounted for 31 per cent of all home loans in September - up 5 per cent on the previous month.

"With property prices levelling off, people are less inclined to move house and are looking to remortgage, either to get a better deal or to release some capital for home improvements," says Siobhan Hotten at Charcol, the independent mortgage broker.

Ms Hotten reports that many of those remortgaging have come to the end of a fixed period and want to take advantage of the competitive deals on the market, instead of automatically settling for their lender's standard variable rate (SVR). But there are also those who have been on an SVR for years who have finally realised the benefits of remortgaging.

If you want to remortgage, you should look at two or three-year deals. Ms Hotten says that up until a few months ago, the best deals were available on fixed or discounted mortgages, but an increasing number of very competitive capped rates have come on to the market in the past month.

She recommends Charcol's capped mortgage, offering 5.12 per cent until 1 November 2002. Alternatively, if you want a fixed rate, GMAC is offering 5.49 per cent fixed until 1 March 2003, and West Bromwich Building Society 5.35 per cent fixed until 31 December 2002.

"Two- or three-year money tends to be lent at rates below 6 per cent," says Ms Hotten. "But five-year rates have been between 6 and 6.5 per cent and we feel that may be too high over the longer term as interest rates could fall."

A further interest rate rise cannot be ruled out, although this seems less likely than it did a few months ago. More advisers believe that the Bank of England will lower interest rates next year, which is why Plan Invest's Mr Owen recommends that people look at ISAs and fixed savings accounts as well as mortgages.

"If interest rates come down next year I'd expect the stock market to benefit," says Mr Owen. "Therefore, it may be better taking an ISA out sooner rather than later as it is likely to be cheaper now than it will be next March."

The other advantage of taking out an ISA now, rather than leaving it until the annual scramble at the end of each tax year, is that you'll enjoy a couple of months' extra growth.

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