David Prosser: Borrowers hold back, savers act now

The MPC voted against a cut last month by just five to four, so if just one member changes their mind on Wednesday, when the committee begins its August meeting, a reduction will be the result. Sir Andrew Large, who voted to hold rates in July, this week said he was anxious about the consumer slowdown, so we have one obvious candidate for a change of heart.

Interest-rate reductions most obviously benefit mortgage borrowers. If you're thinking of taking out a new home loan - or remortgaging - it may just be worth holding on a week or so to see what deals emerge.

Fixed-rate mortgages are already fantastic value, as many lenders have been cutting rates in expectation of a downward move from the MPC. As our best buys table on page 12 shows, it is now possible to fix the cost of your mortgage rate at below 4.5 per cent for the next two years, or even for longer.

Usually, a fixed-rate mortgage is a gamble. You will have to pay a fee to get out of the deal early, so you're banking on the cost of variable-rate home loans not falling below the rate at which you have fixed.

However, with fixed rates at these levels, the downside risk is minimal. It's tough to imagine variable rates falling far enough - the cheapest deals are now just below 5 per cent - to make you really sore about locking in at under 4.5 per cent.

On the upside, a fix gives you absolute certainty about your monthly repayments for the term of the deal. In the context of rising home repossessions, that is invaluable. And, while the Council of Mortgage Lenders says repossessions are still running at just one-tenth of the levels of the early Nineties, almost 5,000 people have lost their homes this year after failing to keep up with repayments. That's a 51 per cent increase on the first half of 2004.

Finally, let's not forget about savers - base-rate reductions are bad news for people with spare cash rather than large debts. If you fall into this camp, however, you can limit your losses by acting quickly.

Some of the most generous accounts have already announced cuts in their rates - ING Direct, for example, will lower what it pays on Monday - but several fixed-rate savings accounts still look attractive. The "best buys" table on page 14 lists fixed-rate bonds with terms of between one and five years that are paying about 5 per cent annually. If you don't need instant access to cash, these are definitely worth considering.

* * * Don't you just love it when the credit business get its knuckles rapped? Let's hear it for the often-criticised British regulatory system, which has stood up for consumers against expensive lenders twice in recent days.

First, on Tuesday, the Office of Fair Trading announced an inquiry into eight lenders, including market leader Barclaycard. The OFT will ask how the ludicrous fees these lenders charge when people settle bills late - up to £25 a time - can possibly be justified.

The very next day, the Court of Appeal told lender London North Securities that it could not enforce the £384,000 debt of Tony and Michelle Meadows. The couple, from Southport, had borrowed just under £6,000 from the company in 1989, but the debt escalated in outrageous fashion when they fell behind with the repayments.

Let's hope the tide is finally turning against rip-off lenders.