Money Insider: Leeds Building Society's rate is good but 10 years is a long time

On Wednesday, Leeds Building Society launched a new fixed-rate bond paying a monthly income at an impressive 4 per cent. But it comes with a big downside: you can't touch your savings for 10 years.

Many people will feel this is too long not to have access to their capital, although for those whose sole aim is to get the best monthly income they can from their nest egg, that rate will look very tempting.

This is the first time a 4 per cent fixed-rate savings deal has been available since November 2012. Whether it will turn out to be a wise savings choice is hard to judge due to the long fixed term, particularly as experts and economists have repeatedly got it wrong when predicting potential base rate increases over the last three or four years.

I'm sure many people looked at the 10-year fixed-rate savings bond from Birmingham Midshires in the summer of 2008 and thought it was too much of a risk. In hindsight, however, taking up the 6 per cent on offer at the time would have turned out to have been a very shrewd move.

If – and it's a big if – you are 100 per cent comfortable locking your cash away, it's worth comparing the monthly income available from the current "best buy" fixed-rate accounts paying monthly interest.

For example, based on a savings pot of £50,000 the Leeds BS 4 per cent bond will deliver interest of £133.33 per month after 20 per cent tax, against £100.33 with the shorter Tesco Bank five-year fix at 3.01 per cent. If you opted for the Tesco deal, you would need to get a rate of at least 5 per cent for the subsequent five years to achieve the equivalent income generated by the Leeds rate of 4 per cent for 10 years.

If income now (rather than later) is your key concern, the extra £1,980 net you'd earn in the first five years with Leeds may be the main factor.

With so many unknowns that could affect interest rates, it's hard to be sure whether this is a good deal, but much will come down to individual savers' needs and preferences.

When rates do eventually rise, it's likely to be slowly and in small increments (0.25 per cent) – and whether providers decide to pass the full Bank of England increases on to savers is not a foregone conclusion.

With the Funding for Lending Scheme due to stay until January 2015, savings rates are likely to remain stifled for the next 12 months. However, factors such as unemployment levels, inflationary uncertainties and an unstable eurozone could also have a big say in where rates end up during the coming decade.

Yorkshire mortgages cheaper than Help to Buy deals

This week Yorkshire Building Society launched 36 new 95 per cent mortgages, including deals through its Chelsea BS and Norwich & Peterborough BS brands.There is a wide range of mortgage options to choose from, with different rate and fee combinations and with some offering cashback too to borrowers with 5 per cent deposits.

The rates are far more competitive than on some of the headline deals launched under the Government's Help to Buy scheme.

For example , the Halifax is charging interest at 5.59 per cent (no fee) for a 95 per cent mortgage, yet with Yorkshire the rate is 4.89 per cent with no fee and £500 cashback.

On a £120,000 mortgage (25 years), the Yorkshire rate, 0.7 per cent lower than the Halifax, will save you £50 per month on your repayments. So including the cashback you would be £1,700 better off with the Yorkshire deal over the first two years.

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