With the number of available mortgages continuing to grow, we take a look at what's hot in the mortgage market in September.

65% LTV: Norwich & Peterborough

On Friday, the Norwich & Peterborough Building Society will reduce the rate on its already impressive 65% LTV two-year fixed-rate mortgage from 2.19% to 1.99% as it seeks to make further gains in the lower-risk mortgage sector.

The fee of £295, which will remain unchanged, offers terrific value compared to similar products in this sector. It has already made the mortgage a very strong competitor in the market for lower value loans, which is shown in our guide to mortgage arrangement fees.

Norwich & Peterborough, 1.99% for 2 years, max 65% LTV, fee £295.

(Effective Friday 13th.)

Also check out: Yorkshire Building Society, 1.99% for 2 years, max 65% LTV, fee £845.

75% LTV: Post Office

Amid a full refresh of its mortgage portfolio this week, the Post Office has improved its 75% LTV two-year fix to just 1.98%.

The £995 fee remains some distance below the lofty sums charged by Accord and the Chelsea BS, making the new Post Office deal among the most competitive products for this loan-to-value.

Post Office, 1.98% for 2 years, max 75% LTV, fee £995.

(Effective Thursday 12th.)

Also check out: Barnsley Building Society, 2.09% 2 year tracker, max 75% LTV, fee £845.

80% LTV: Loughborough Building Society

Keeping under the radar - rather unfairly - is a three-year fix by the Loughborough Building Society, which was launched at 2.89% this week for a maximum loan-to-value of 80%.

The rate is marginally higher than the cheapest deals on the market for this sector (e.g. Post Office, 2.84% / £995; Accord, 2.84% / £845; Leed Building Society, 2.85% / £199), but given a fee of just £299, a re-mortgage legal cost rebate and a revaluation fee refund, it proves excellent value compared to its close rivals.

Loughborough Building Society, 2.89% for 3 years, max 80% LTV, fee £299.

(Already for sale.)

Also check out: Leeds Building Society, 2.85% for 3 years, max 80% LTV, fee £199.

90% LTV: Hinckley & Rugby Building Society

Another Leicestershire society, Hinckley & Rugby, is among the front-runners for high loan-to-value mortgages. A tracker mortgage at 90% is available at 3.75% for two years for a fee of £295.

The Bank of England's recent forecast that the base rate is unlikely to rise until 2016 should offer some security in a short-term tracker deal at this time. Nevertheless, buyers interested in this mortgage will need to ensure that they could afford an extra 0.25% or 0.50% in case of any unexpected changes to the base rate occur over the coming two years.

Though HSBC offers a lower headline rate for this loan-to-value (3.59%), the £1,499 fee is a hefty addition and is unlikely to provide the best value for money given the size of the loans that will be advanced to first-time buyers.

Hinckley & Rugby only charges property assessment fees where the valuation exceeds £1 million, while it also offers free admin fee for remortgage arrangements.

Hinckley & Rugby Building Society, 3.75% 2 year tracker, max 90% LTV, fee £299.

(Already for sale.)

Also check out: Monmouthshire Building Society, 3.75% 3 year tracker, max 95% LTV, no fee.

Keith McDonald
Which4U Editor

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The new Current Account Switching Service goes live today, allowing consumers to switch change between participating banks in just seven days.

The launch of the new £750 million switching system will cut the transfer time between bank accounts from up to 30 working days to just seven working days.

Customers applying to a new bank can select a convenient switching date that causes minimal disruption.

The new bank makes all the arrangements, including the transfer of direct debits and standing orders. An automated redirect function will forward any inbound or outbound payment instructions from the old account to the new one.

The Switch Guarantee also ensures that customers are refunded for any charges if any problems arise during the process.

33 banks and building societies have already signed up (full list provided here), covering most of the existing current account market.

It remains to be seen whether the new system will encourage consumers to act, but it has driven banks to compete with their current account deals in recent months.

Nationwide and Santander are both offering attractive interest rates on selected current accounts, while Halifax and the RBS Group have recently added a cashback feature to their accounts (read more).

The Money Advice Service has predicted that switching consumers could benefit to the tune of £600.

Mark Fiander, an executive director at the Service, told the BBC that a move to cut charges or to gain interest on credit balances could mount up to £500 or £600.

Adrian Kamellard, the chief executive of the Payments Council, described the launch as "the beginning of a new era".

"Over the past two years multiple financial institutions have come together to design and implement this new, free and standardised service which will raise the bar internationally for retail banking," he said.

For more information, see our guide to the new Switching System. You can also check out the latest offers on our current accounts page.

Keith McDonald
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When pursuing a mortgage loan, the choice will have to be made between a fixed-rate mortgage and a variable rate or tracker mortgage.

It is an important call to make, as one type of mortgage could prove to be much cheaper than the other. So, what are the things to consider when weighing up these different mortgage types?

The Variable Rate Mortgage

Variable rate and tracker mortgages can both fluctuate from their starting rate.

A tracker mortgage normally mirrors any changes in the base rate. So, for example, a 0.25% cut to the Bank of England interest rate would be passed on to the customer via an equivalent cut to the mortgage rate by the lender.

A variable rate mortgage, on the other hand, can change owing to other factors. A lender might raise its variable rate if it experiences a rise in costs, or lower it if it seeks to become more competitive.

What to consider with variable/tracker mortgages:

• [+] The main advantage of a tracker mortgage is that homeowners can expect to benefit from any reductions in the Bank of England base rate.
• [–] The main disadvantage is that homeowners will be adversely affected by any increase to the base rate, or by a rise in a lender’s variable rate.
• [+] Because the rate is subject to change, prospective customers could benefit from some particularly good deals. Banks and building societies can attract customers with low tracker rates in the knowledge that they can these rates can be raised if circumstances change.
• [–] But for this reason, customers (and especially first-time buyers, on higher initial rates) will need to ensure that they can afford the repayments if the rate does increase.

Undoubtedly, there is an element of chance with tracker or variable rate mortgages. It is difficult to anticipate how the Bank of England base rate will behave over a number of years.

However, the Bank of England’s predictions that the base rate is unlikely to rise until 2016 have been designed to bring more certainty to the markets. Tracker mortgages are the products most likely to benefit from this.

The Fixed Rate Mortgage

With a fixed-rate mortgage, the initial rate remains consistent for an agreed period, normally lasting between two and five years. The rate that you sign up to is the rate that you pay for the entirety of this period.

At the end of the fixed-rate term, the rate reverts to the lender’s standard variable rate. This varies from lender to lender so it could be an important factor to note when choosing a mortgage if you don’t intend to switch again immediately afterwards.

If you decide to cancel your fixed-rate mortgage before the end of the fixed period, you will receive a penalty in the form of an early redemption fee. This will usually be between 1% and 5% of the cost of the mortgage.

What to consider with fixed-rate mortgages:

• [+] A fixed-rate mortgage protects against any increases in the Bank of England base rate. Even if the base rate goes up, your repayments remain the same.
• [–] Conversely, if the base rate goes down – though that’s unlikely at present – tracker rates could move below the fixed rate that you’re subscribed to.
• [+] Establishing a fixed monthly payment for several years makes it easier to budget and offers security to a homeowner.
• [–] Though fixed-rate mortgages have been driven down to record low levels in 2013, arrangement fees have risen significantly, which can make attractive deals expensive.

(See our guide to mortgage arrangement fees for more details.)

Stick or Twist? Choosing between a variable and a fixed-rate mortgage.

2013: The Year of the Mortgage

Mortgage rates have been driven down in 2013 towards their lowest levels in a generation. It’s a good time to make inroads into repaying your loan, if that’s possible.

If you’re able to remortgage from a 4.5% rate to a 3% rate, for example (whether fixed or variable), using some of the savings on your monthly payment to overpay on your mortgage could save you thousands of pounds on your loan and reduce the term considerably.

(See how much you could save using our over-payment mortgage calculator.)

The caveat is that most lenders only allow a borrower to overpay by a small percentage (max. 10%) on their standard monthly payment before they trigger an early repayment penalty. One of the advantages of offset mortgages is that they offer greater flexibility to repay more without incurring charges.

Fixed and variable rate mortgages both have their strengths and weaknesses, but both should offer some reward for the effort of switching.

Standard variable rates are not always particularly competitive, and it could be possible to halve your interest costs by making the choice to switch in this ultra-competitive climate.

Keith McDonald
Which4U Editor

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The UK's four largest banks have all scored abysmally in a new poll, demonstrating the clear need for the new fast-track switching system that will allow consumers to switch banks more easily.

The four – Barclays, the RBS Group, Lloyds Group, and HSBC – control around 75% of the market for current accounts, but have achieved pitiful satisfaction ratings in a poll conducted for campaign group Move Your Money.

Barclays, which has been further gripped by scandal this week, finished rock-bottom of the satisfaction tables, registering a score of just 4%.

RBS, which includes NatWest and Ulster Bank, fared little better, finishing second-bottom with just 7%.

HSBC, which includes First Direct, achieved just 18%, while Lloyds, which has launched TSB as a standalone bank ahead of re-privatisation moves, scored 21%.

The Nationwide Building Society, on the other hand, whose current accounts (including the 5% FlexDirect account) continue to attract new customers, ranked at 64%.

HSBC's involvement in money-laundering scandals has done its reputation no favours.

Public Rancour Remains

Respondents were invited to assess the banks and building societies on five categories: honesty; customer service; culture; supporting the economy; and ethics.

The results showed that rancour still remains over the large scandal-struck institutions, with poor handling of PPI insurance, shady tax arrangements, and vast bonuses all condemned.

The grim result for Barclays is a blow for the bank’s chief executive, Antony Jenkins, whose hopes of instilling a new culture within the institution have failed to register with the public.

Barclays scored just 4% in MoveYourMoney's satisfaction poll - a blow to chief Antony Jenkins' attempts to turn the bank around.

The poll clearly identified smaller building societies as a strong and ethical option for those fortunate enough to live in those areas.

30 of the 38 institutions which earned a ‘green’ indicator on the Move Your Money scale (by scoring above 70%) are mutuals, but only seven of these offer current accounts.

The Cumberland Building Society, which ranked highest of all current account providers at 89%, has signed up to the new switching service, meaning that customers could transfer their accounts to the society within seven days (find out more).

However, close contenders Coventry BS and Leeds BS, which scored 85% and 79% respectively, are not currently signed up to the new service.

But the rise of Metro Bank could be the success story for the new switching system.

Based predominantly in Greater London and surrounding counties, the first new bank on the high street for over 100 years has fashioned itself around customer service since its launch three years ago.

The new poll suggests that the bank is capable of meeting its promises, as it earned full marks for customer service on the way to a respectable 77% overall.

Metro Bank's promises to deliver on customer service have been met so far. What next for the fast-growing bank?

Time to Act on Dissatisfaction

Laura Willoughby MBE implored customers to put the new system to work and act on their dissatisfaction by moving to a new bank.

"We know people are demanding more than broken banks that take us for a ride," she said.

"You don’t have to put up with disgraceful scandals, poor service and excessive bonuses any more. It’s payback time – you can switch!"

Find out more about the new seven-day current account switch service here.

Keith McDonald
Which4U Editor

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When we're choosing between mortgage lenders, we're normally faced with the choice between a bank or a building society. Is there any reason to favour one over the other?

On the surface, there doesn't appear to be a great deal of difference. Both sets of institutions operate branches and provide similar products and services to consumers.

In the background, there's more of a difference relating to structure and ownership. Banks are traditionally owned by shareholders, and therefore hold profit as a strong objective, while societies are owned by their customers (often termed ‘mutuals’), which is seen to give them a more ethical outlook.

But for your two-year fixed-rate mortgage, for example, is this really going to impact upon your decision?

To look at it another way: what might influence your decision between one or the other?

1. Availability

One of the more significant deciding factors may be availability and which lenders are able to lend on a property. It doesn’t matter how good the offers are if the lender is unwilling to lend on a property too far away from one of its branches.

Banks have recently been accused of withdrawing from metropolitan regions to focus upon more wealthy suburbs (read more). And though building societies serve local communities well, several will only lend on properties within a fixed radius of their offices. If you can track down the lenders based within 30 miles of the property, that's a useful basis on which to build your shortlist.

2. Terms and Conditions

Which lenders are willing to lend on a flat in a twelve-storey tower, or a property near a pylon? Are there any specified age restrictions? Lenders can differ quite radically over what they are willing to lend on and who they are willing to lend to.

The terms are likely to differ according to the type of lender. For example, the minimum loan stipulated by a smaller lender may depend on the distance between the property and its Head Office. This is less likely to be an issue with major banks or the Post Office with their much greater coverage.

But there may be a case to say that building societies are more likely to make exceptions for members because not all lending applications will be churned through a central electronic decision-making process. Even the new TSB Bank, which promised ‘local banking’ upon its launch, has had to concede that lending decisions are made centrally and cannot be overruled.

3. How the Rates Compare

Mortgage rates are subject to many different factors, some of which include the stock market, central monetary policy, an institution’s operating costs, and the inter-bank lending rate (Libor).

Government lending schemes have helped to drive down the cost of mortgages. So, how do banks and building societies compare in this environment? Let’s compare the cost of the best two-year fixed-rate mortgages at different loan-to-value categories. (Products listed are accurate to September 2013 and are subject  to change.)

60% / 65% LTV

70% / 75% LTV

80% / 85% LTV

From this example, banks and building societies appear to be roughly on-par with each other in this competitive environment. It should be noted, though, that arrangement fees can be hugely influential in turning a great rate into a less competitive one. This is especially the case with lower loan-to-value loans.

With consumers now becoming more astute to the impact of arrangement fees, lenders are now beginning to offer more 'tiered' products for each loan-to-value. So, at 60% LTV, a lender may offer a 1.99% mortgage with a £1,500 fee and a 2.39% mortgage with a £500 fee, which will better suit borrowers applying for smaller sums. Weighing up the right balance between rate and arrangement fee for the amount that you need could save you hundreds on your loan (see our guide for more details).

Norwich & Peterborough BS: one lender that offers a range of rates and fees on the same loan-to-value.

4. Perks and Prisons

Some lenders are adding perks that reward customers who bank with that institution, which tends to be an advantage for banks over building societies. Santander’s 123 Current Account currently offers 1% cashback on Santander mortgage payments, for example, so a customer paying £750 every month on their mortgage receives £90 back every year.

At the same time, however, there can be the odd shock in store, as Bank of Ireland customers discovered last year when the bank doubled its standard variable rate to the horror of thousands of UK customers.

5. Reputation

There is often a negotiation to be made between the quality of the products on offer and the quality of customer service. Smaller mutuals tend to perform much better in satisfaction ratings while major banks are currently struggling. But smaller lenders are not always able to match the best rates, and it is for customers to decide how much they value service and reputation if it comes at the expense of a higher rate mortgage.

6. Safety

Building societies have proven themselves to be more secure throughout the financial crisis. The collapse of Northern Rock, the bailouts afforded to RBS and Lloyds, and the capital black hole discovered at the Co-operative Bank all underline the difficulties that banks have endured over recent years.

As always, we recommend that you seek professional advice if you are unsure which type of mortgage is right for you and that all of the information provided above is for use as an overview only and should not be the basis for your mortgage decision.

Keith McDonald
Which4U Editor

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Leeds Building Society has responded to competition at the top end of the savings market by raising the rates on its 5-year fixed rate bond and ISA up to 3.05%.

The rates on the market leading fixed-rate bond and ISA have both increased from 3.00% to 3.05%, nudging ahead of competition from Skipton Building Society and Secure Trust Bank for the same term.

The Leeds and Skipton ISAs (3.05% / 3.00%) are among the few products to offer returns higher than the current rate of inflation, which fell slightly to 2.7% this week.

The increase to Leeds’ fixed-rate bond, which, unlike the ISA, is subject to tax, nudges it ever closer to matching inflation. The new 3.05% five-year bond will return roughly 2.45% after tax. (Find out more about the difference between fixed-rate bonds and ISAs.)

Only one fixed-rate bond currently matches inflation after tax (Skipton, at 3.5%), but savers will have to lock away their cash until the end of the decade to achieve that kind of return.

Leeds BS nudges ahead for 5-year fixed-rate savings accounts, paying up to 3.05%.

Not oblivious to the occasional need for savers to access their cash, Leeds has also improved its parallel five-year bonds and ISAs which allow savers to access a quarter of their savings without penalty.

The ‘flexible’ five-year fixed-rate products have received a larger increase, rising from 2.75% to 2.90%.

Kim Rebecchi, the sales and marketing director at Leeds Building Society, said that the products had been timed to coincide with the large volume of fixed-term deposits that are due to mature over the coming months.

“Whilst the traditional ISA season is in March and April each year, around the tax-year end, our research showed us that circa £8.5 billion of fixed rate ISA balances mature in Q4 2013,” she said.

“It also highlighted that a further £26.7 billion of non-ISA bonds are maturing during the same period, which means that many savers will now be looking to maximise their returns.

“We had a great response to the first issues of these products, and are delighted to now increase the rate to further assist those savers looking for value, security and a return that is higher than the current rate of inflation (currently 2.7%).

Worth a Five-Year Term?

This is the million-dollar question. Recent overtures by the Bank of England have suggested that interest rates are unlikely to rise until 2016.

But experts are speculating that the rate may need to rise before this if the housing market begins to boil over.

The pace at which interest rates are expected to increase is also prompting a note of caution for those considering locking their money away for several years.

So, will savings rates begin rising to the point where 3% is soon surpassed? It is difficult to say.

But if it takes two or three years for shorter-term savings accounts to compete with inflation (for standard taxable savings accounts that means 3.38% today), is it prudent for savers to hold off indefinitely on substandard rates to see what happens?

A new infographic has shown that the cost of living is set to rise by 64% over the next twenty years. For those hoping to build their nest-eggs, the average return on standard savings accounts stands at just 0.67%.

The practice of adding introductory bonus rates to savings accounts is under scrutiny from the Financial Conduct Authority, and there is no guarantee that savers will benefit if institutions are stopped from offering improved rates to savers on a temporary basis.

Fixed-rate products offer a sense of certainty, and there's no reason why we should ignore the benefits. What other help are savers guaranteed to receive in the upcoming years as they seek to build for the future?

Keith McDonald
Which4U Editor

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Nationwide has improved the rates on its long-term bonds and ISAs, but they still fall short of the market leaders in this sector.

The society has launched new a four-year bond and ISA paying 2.4% alongside a five-year issue of each product paying 2.5%.

The latest four-year bond, which is also available through the Derbyshire, Cheshire and Dunfermline Societies, is a full half-point increase on the previous issue (1.9%). The five-year bond is a new release. After tax, however, the maximum return available is just 2%.

(Find out more about the difference between cash ISAs and fixed-rate bonds.)

The move follows the improvements made by Leeds Building Society to its long-term fixed-rate savings products, but Nationwide remains some distance behind the smaller mutual.

Leeds improved the rate on its five-year bonds and ISAs to a market-leading 3.05% this week. A flexible product that offers some access to funds is also available, at 2.90%.

By contrast, the Nationwide’s new terms mean that savers will still fail to match inflation, even if they choose to lock away their funds until 2018.

Nationwide's improved bonds and ISAs better many high-street rivals, but remain some way from the top.

Darren Bailey, Nationwide’s head of savings pricing, says that the new products “beat the rates offered by other major high-street competitors”. But competition stretches far beyond the largest banks.

The Nationwide’s four-year bond is also bettered by Vanquis’ three-year equivalent (2.41%), which might seem a more attractive option for investors unwilling to lock away their funds for so long.

Experts are warning savers against securing their cash for longer terms while rates remain at their historic low.

But savers will feel entitled to ask when conditions are set to change, with an extension of the Funding for Lending Scheme already in the pipeline and the Bank of England claiming that interest rates will remain low until 2016.

Keith McDonald
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Savers are being advised to shift their cash if they are facing a rate cut over the coming days.

Around two million savers with the Treasury-supported National Savings & Investments (NS&I) and the taxpayer-supported RBS Group will see the interest rates on their accounts cut in the near future.

Close to a million loyal savers with NS&I will see their rates cut as the provider brings old accounts – some dating back almost a century – in line with new return-calculating methods.

A number of old NS&I savers are able to transfer onto its current index-linked savings certificates, which return interest at the RPI measure of inflation plus 0.05%. But many now remain stuck with fixed-interest certificates paying a pitiful 0.09%.

While the best rates available on easy access accounts are far from spectacular, they offer much more than those that loyal savers have been left with from the Treasury-backed provider.

Over a million RBS / NatWest customers will also see returns on their tax-free ISA accounts slashed by up to 1% after the bank decided that the higher returns were “unsustainable in the current market”.

The bank is converting many of its old ISAs to the latest issue, which returns just 1% on balances between £1 and £24,999, and 1.5% on balances above £25,000.

As a result, some of the group’s three million existing ISA customers will receive an increase in their rates while others will see their rates cut by up to half.

RBS says that customers stand to benefit from the changes, with some high-value investors set to see their ISA rates treble from 0.5% to 1.5%.

However, savers with a better performing account such as the e-ISA (2.25%) will be disappointed when these rates fall into line with the new simplified accounts.

Switch to a Better Account?

Experts are now reminding consumers not to settle for second best as the cost of living continues to rise at an above-target level.

One of the problems is the lack of knowledge about transferring cash ISA balances. ISAs are deceptively versatile, and balances can be moved from bank to bank provided that the new account accepts inbound transfers.

Competitive tax-free accounts that allow inbound transfers include the one-year fixed rate ISA from Virgin Money (1.91%) and Aldermore Bank (1.85%).

The best easy-access ISAs currently available include the Kent Reliance 60-Day Notice ISA, which offers 1.80% on balances above £1,000, while a host of providers, including Virgin Money, Britannia, and the Mansfield and Teachers Building Societies, are offering 1.75% on instant access accounts.

So, it might be a good time to review your current rates and see if you can improve by switching your ISA nest egg to another provider.

(Want to know more about transferring your cash ISA? Find out here.)

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EDF, one of Britain's 'big six' energy companies, has caused a stir by announcing a much smaller price hike than its rivals.

The firm announced a winter rise of 3.9% in gas and electricity prices, which will add around £50 a year to the average household bill.

The large energy companies have announced autumn price rises over recent weeks, leading politicians to question the competitiveness of the energy market.

Four of the 'big six' – British Gas, nPower, Scottish Power and SSE – have announced price increases between 8.2% and 10.4% which will come into effect during the autumn. E.On is expected to announce a 6.6% increase for the New Year in due course.

Companies have blamed rising wholesale prices and higher distribution costs for the price hikes. But EDF said it was “holding back rising costs” to limit rises for customers.

Though any rises are challenging for customers, the firm said, its restrained price rises would keep prices much cheaper than its major rivals.

“I know that price rises are always unwelcome, but we have taken the first step to show what can be done if rising costs are tackled head-on,” said EDF’s chief executive, Vincent de Rivaz.

New Energy Switching System

The latest round of increases has brought an angry response from consumer groups and politicians, and has raised calls for an improved switching system that would allow consumers to switch from their current supplier with greater ease.

It can currently take up to six weeks for customers to transfer from one energy supplier to another, which has deterred consumers from switching and cultivated a lack of competition between big suppliers.

But energy secretary Ed Davey has cited the new current account switching system as a model that the energy industry must follow.

The new £750 million system processes far more complicated data than that transferred between energy companies within seven days. Therefore, commentators have argued, energy companies should be able to cut the time required to transfer accounts down to just one day.

Mr Davey is set to continue his attack today at a conference arranged by Energy UK, where energy companies will be asked to be more transparent and show how they can do more to keep bills down for hard-pressed consumers.

At Which4U, we’re looking at different energy-saving techniques to help consumers protect themselves from the impact of higher energy bills. Have you considered LED lighting, for example, which uses up to 80% less electricity than standard bulbs? Check out our blog for more money-saving tips.

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There was some good news for consumers ahead of the Christmas season as inflation fell to its lowest rate for more than a year.

The consumer price index (CPI) measure of inflation fell to 2.2% in October, from 2.7% in September. The retail price index measure of inflation fell to 2.6%, from 3.2% the previous month.

The Office of National Statistics said the fall was due to falling transport costs, which registered their biggest drop in over four years.

The cost of petrol has fallen owing to fierce competition between supermarkets, while airfares have also fallen.

Ryanair boss Michael O’Leary recently said that the airline’s winter prices were ‘weaker’, which would keep profits subdued.

The annual price rise in the cost of education also fell, as the impact of tuition fee rises was reduced.

And food inflation, though still troublingly high, fell by half a percent in October, from 4.8% to 4.3%.

Better News for Savers?

On the surface, the fall is good news for savers, who can now achieve returns much closer to inflation through the best easy-access ISAs (1.80%) and even surpass inflation through fixed-rate accounts.

A 3 year fixed-rate E-ISA through Virgin Money will return 2.40% (inbound transfers accepted), while a 5 year fix will return 3.00%.

For taxable accounts, savers who are taxed at the standard rate now require an account returning 2.64% to match inflation.

Savers will have to fix for at least 3 years to achieve this. A 3 year fixed-rate bond with Shawbrook Bank returns 2.65% for those investing over £5,000, while Vanquis Bank follows closely behind at 2.56% on bonds worth at least £1,000.

It is also difficult to overlook the interest-paying current accounts offered by Nationwide and Santander, which surpass most savings accounts without restricting access to funds.

The inflation respite is likely to be temporary, however, as the latest round of price increases from energy companies – some as high as 10% – come into effect across November and December.

Lower inflation also acts as a false dawn for savers, as it reduces the pressure on the Bank of England to raise interest rates, postponing the more natural recovery of savings rates in the longer term.

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Help to Buy has improved social mobility and has allowed first-time buyers to get an all-important first step on the housing ladder, David Cameron said yesterday.

The Prime Minister praised the scheme for helping hardworking people to own their own home.

“Without Help to Buy, we were beginning to see a country where only people who had wealthy mums and dads who could give them the money for their deposit were able to buy a flat or a house,” he said.

Help to Buy has supported over 2,300 successful applications in its opening month, according to participating lenders. It has generated new mortgage lending worth £365 million (read more).

Over three-quarters of applicants are first-time buyers, while the vast majority of applications have originated from locations outside of London and the South East.

Ben Thompson, Managing Director of Legal & General Mortgage Club, said the figures showed a housing market "moving at different speeds", adding that "a real need for assistance remains in many regions".

Demand Driving Up Prices

Concerns remain, however, that the scheme will push house prices out of the reach of those it is designed to support.

Increasing numbers of surveyors have reported rising house prices across the country.

The Office of National Statistics says that annual house price inflation rose to 3.8% in September, but it pointed out the wide disparity between different areas of the UK.

Prices fell by 1.1% in Scotland and 1.5% in Northern Ireland but rose by 9.4% in London, it said.

The Royal Institution of Chartered Surveyors said that measures needed to be taken to prevent "soaring" demand from outstripping supply.

Further concerns have been raised that a housing shortfall is growing in the capital, where developers have become more concerned with high-end prime properties for wealthier buyers than affordable housing for average earners.

The growing affordability gap in London could force businesses away from London, warned leading property agency Savills, as fewer employees are able to afford suitable accommodation within commuting distance of their workplaces.

Help to Buy Still Helpful

Mr Thompson said the Help to Buy scheme was important for less heated regions, but added that the supply of housing had to remain a top priority.

"While concerns persist about a bubble forming in and around the capital, things are not as buoyant in other parts of the country," he said.

"The long term issue of housing supply must stay top of the political agenda. Although house builders are projected to build 170,000 more homes a year in the next 2-3 years it is still not enough to meet the chronic undersupply the UK faces.

"This problem needs to be solved if a healthy equilibrium is to be restored and we are to create a housing market that is sustainable in the long-term."

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Conditions have improved for first-time buyers in the last 12 months, according to new figures from the Council of Mortgage Lenders (CML).

The number of mortgages advanced to new buyers in September reached 23,600, the CML said – a third higher than the same month in 2012.

Over the three month period between July and September, almost 75,000 mortgages were advanced to first-time buyers. This represents a similar rise of around a third on the same period last year.

The figures reflect a more inclusive market for first-time buyers, with cheaper mortgage rates and the recent extension of the Help to Buy scheme.

The scheme has proven popular among new buyers since its launch last month, supporting over 2,300 successful applications.

The CML figures also appear to reflect a rise in house prices over the last year, which may add to concerns that the government initiatives are driving demand too vigorously.

While the volume of first-time buyer mortgages in September rose by a third on last year, the value has risen by 50% to £3.3 billion.

Help to Buy: "Responsible" Lending

Prime Minister David Cameron defended the Help to Buy scheme earlier this week, noting that the vast majority of applications were made outside of London and the South East.

The lenders involved with the scheme, RBS, NatWest, and Halifax, have shown that the average loan size sought by Help to Buy applicants (£155,000) is relatively modest when compared to average prices nationwide (c. £250,000).

Though the scheme is designed as a short-term fix, there are signs that borrowers are considering the affordability of their mortgage in the medium term rather than exposing themselves to the risk of rate increases.

Jeremy Duncombe of the Legal & General Mortgage Club said there had been a revival in fixed-rate products over variable rate deals in 2013, with 86% of all home purchase mortgages and re-mortgages in August involving a fixed-rate deal.

The scheme is therefore being presented as supporting responsible lending rather than encouraging buyers to overextend themselves or to take undue risks. Buyers are also being reminded that Help to Buy deals work in the same way as standard 95% mortgages, and must be given the same considerations.

(Fixed rate vs. variable rate mortgages: See our guide.)

Reform Stamp Duty for First-Time Buyers

Though conditions appear to be improving, the CML believes that the government could still do more for first-time buyers by reforming stamp duty.

The Council said it was counterproductive to launch a scheme for first-time buyers whilst still subjecting them to the additional burden of stamp duty.

"There is a perversity in introducing policy initiatives that seek to bridge the deposit gap for households, while at the same time exposing the same group of buyers to a material tax burden," it said in its latest newsletter.

(How does stamp duty affect you? See our guide.)

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Major lenders are challenging Barclaycard's dominance in the balance transfer credit card market, with Halifax becoming the latest to improve its best 0% offer to 28 months.

Barclaycard has dominated the sector in recent years, fastidiously maintaining its market-leading position for the longest balance transfer duration.

The lender recently responded to competition from Tesco by extending its 0% offer twice in one week to a staggering 30 months (read more).

But major lenders are not allowing Barclaycard to rest on its laurels, with a host of competitive 28-month offers.

On Monday, Halifax joined RBS, NatWest and Tesco in offering 28 months at 0% on balance transfers. The updated card (previously 27 months) offers 0% on balances up to £3,000 transferred within the first 90 days.

Its balance transfer fee of 2.45% (initially 3%, then part-refunded) compares well to other cards of this nature. The RBS and NatWest Platinum cards charge a fee of 2.99%, while the Tesco Balance Transfer Clubcard applies a 2.9% fee.

The Halifax card also offers 0% on purchases for six months, which matches the offer available through RBS and NatWest and beats the Tesco Clubcard by three months.

The card competes with Barclaycard’s second longest 0% card, which was extended to 28 months when the longest offer became 30 months. This also offers a lower fee of 2.49% (compared to 2.90% for the 30-month card), and six months at 0% on purchases.

Halifax 28 Month Balance Transfer Credit Card

Details

• 0% for up to the first 28 months on balances transferred in the first 90 days.
• Balance transfer fee of 2.45% - initially 3% with a part-refund.
• 0% on purchases for the opening 6 months.
• Manage the card online using Online Banking and Mobile Banking.

How it Compares

Alternatives

Looking for a lower transfer fee?

Why not consider the Bank of Scotland Platinum card, which offers 24 months at 0% on balance transfers, for a fee of just 1.50%.

Though you’ll have less time at 0% to reduce your existing debts, transferring a balance of £3,000 to this card would cost just £45, compared to around £90 for RBS / NatWest.

Looking for an all-round card?

The Halifax All-in-One card is a splendid all-rounder. The card offers 0% on balance transfers and purchases for 15 months, with a transfer fee of just 0.8%.

The card is one of the most competitive in the market for purchases, whilst allowing customers ample opportunity to reduce their existing debts without incurring additional interest.

Looking for a low rate card to keep your interest costs down?

If you regularly carry a balance and would prefer to avoid the long-term balance transfer route, you might consider a low-rate card, such as Sainsbury’s Bank (7.8%) or Barclaycard Simplicity (7.9%).

These cards lack in frills, but with a rate of less than half the current average (c. 18%), they are a useful money-saving option once the initial offer on your existing card has expired.

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Further evidence of the benefits offered by the Help to Buy scheme has emerged, with a surge in mortgage lending to buyers with low deposits.

According to e.surv’s Mortgage Monitor, lending to borrowers at 85% loan-to-value or above has almost doubled over the past year.

Lending increased by 80% in October on the same month last year, it said, with 9,176 mortgages advanced to buyers with a 15% deposit or lower. This is the highest number in five-and-a-half years.

House purchase mortgage loans rose to 69,000 overall, the monitor showed – 32% higher than October last year.

Figures from the Council of Mortgage Lenders (CML) recently showed that the number of mortgages advanced to first-time buyers reached 23,600 in September – one third higher than the same month last year.

But the Mortgage Monitor reflects a more pointed rise in activity for new buyers. Part of this can be attributed to the Funding for Lending Scheme, launched last year, which has improved the availability and affordability of mortgage loans.

The second phase of the Help to Buy scheme has also proven popular since it was launched last month, supporting over 2,300 successful applications in its opening weeks.

Help to Buy After-Effects

e.surv has also echoed concerns about the detriments caused by the stimulus package, however, suggesting that the number of affordable properties is falling as demand drives up prices in high-demand areas. It said that loans on properties worth up to £125,000 had fallen by 6% in October on the previous month.

Property agents Savills has recently warned that a growing affordability gap in the capital may force businesses out of London, as fewer employees are able to afford suitable accommodation with commuting distance of their workplaces.

Equally, though, there has been plenty of defence for the scheme. Ben Thompson, Managing Director of Legal & General Mortgage Club, said the housing market was "moving at different speeds", adding that "a real need for assistance remains in many regions".

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Secure Trust Bank has launched a new seven-year bond, as the battle to allure savers into long-term fixes warms up.

The new fixed-rate bond offers an inflation-busting 3.52% per year (2.82% net) on investments of at least £1,000.

Interest is paid annually on December 31 into a nominated bank account.

The bond nudges just ahead of the Skipton Building Society’s seven-year fix (3.50%), and will appeal to who are happy to commit their cash until the end of the decade.

But savers will have to be certain that access to funds will not be required during the term as no withdrawals or additions are allowed.

Despite warnings by experts that savers should avoid fixing beyond a few years, the appeal of long-term bonds has increased as rates have continued to fall on easy-access accounts.

Current Accounts

But a feasible alternative is available now in the form of current accounts, some of which are comprehensively outperforming savings accounts.

The Nationwide FlexDirect account offers a stunning 5% on credit balances up to £2,500 for the first year. The mutual’s first paid-for account, the FlexPlus account, offers 3% interest as part of its benefits package.

The Santander 123 Current Account offers an unusual combination of cashback and interest. Savers can earn interest 1% on balances above £1,000, 2% on balances above £2,000, and 3% on balances between £3,000 and £20,000. (See our full review here.)

Banks including Halifax and First Direct are also offering incentives of £100 to customers who switch their current accounts.

Though a one-off payment, it would take a balance of around £5,400 in the best performing easy-access ISA (1.80%) to offer that kind of return over the year.

Competition between providers has improved since the launch of the current account switch service, and bank accounts have become more multifaceted, acting as reward schemes and savings accounts. They may now prove to be an ideal option for those wanting better returns on their savings without fixing for a lengthy period.

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The number of repossessions and mortgages in arrears continues to fall, thanks to a strengthening economy and cheaper home loans.

The number of borrowers with arrears worth at least 2.5% of the total mortgage balance fell below 150,000 by the end of September, according to figures from the Council of Mortgage Lenders.

This compares to around 155,000 at the end of June, and over 159,000 at the end of September 2012.

Repossession numbers have also fallen sharply, to just 0.06% of homeowners. At its current trajectory, the number of repossessions across 2013 is likely to fall well below the initial forecast of 35,000.

This indicates that homeowners have found it easier to manage their finances and overcome difficulties with their mortgage repayments.

Remortgaging

One likely reason for this is the improved affordability of mortgage products, stemming from Government initiatives such as Funding for Lending and the Help to Buy Scheme.

The average rate for new mortgages has reached an all-time low of 3.08%, though borrowers have been warned to beware that interest rates could rise much earlier than the Bank of England’s anticipated 2016.

Any rise to the Bank of England base rate would leave any homeowners with a variable rate or tracker mortgage vulnerable to a hike in their mortgage rates.

(Fixed rate vs. Variable rate mortgages: See our mortgage guide here.)

Property analysts HML have suggested that a rise in the base rate to 1.75% would push an extra 30,000 people into arrears over the course of the subsequent 12 months.

But homeowners appear to be astute to the prospect of a rate increase. Remortgaging activity is at its highest level in six years, according to the chartered surveyors Connells.

Remortgaging valuations rose by over 50% in October on the previous year, the firm said.

Meanwhile, the Legal & General Mortgage Club said there had been a ‘revival’ in fixed-rate mortgages as borrowers thought more carefully about affordability in the medium term.

Managing Director Ben Thompson said that homeowners could work on building an ‘equity buffer’ by overpaying their mortgage at the lower rates. He added that it was important to choose the right mortgage product.

“It may seem sensible to opt for the relative stability that a fixed rate mortgage provides”, he said. “There could be additional costs associated with it that makes it a less attractive option.”

To find out more about how mortgage fees influence the cost, check out our guide. Why not also check out our ‘What’s Hot in October’ mortgage summary, which highlights some of the best mortgage deals at different loan-to-value ranges?

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Tesco Bank has reduced a number of its mortgage rates, adding fierce competition to the 85% loan-to-value sector.

Among a number of reductions is the 2-year standard fixed rate mortgage at 85% LTV.

At 2.79%, it is now a standout product in the sector, though the £1,495 fee proves inhibitive to those borrowing a relatively small amount.

(See our guide on the effect of mortgage fees.)

However, the true eye-catching deal is the fee-saver – a 3-year fix at 3.29% with a fee of just £195.

Customers looking for a remortgage option can benefit from free valuation and legal fees, which makes this deal all the more attractive.

• Tesco 3-Year Fee-Saver, 85% LTV.
• 3.29%, £195 fee.
• Free valuation / Legal fees for remortgages.

The Tesco fee-saver rivals the Post Office’s 3-year fix, which is also at 3.29% but comes with a £995 fee.

It also nudges ahead of the Hanley Economic Building Society, which has offered a range of startling deals in recent months. The Hanley Economic offers a 2-year fix with no fee at 3.59%.

But the Tesco fee-saver is matched by the Tipton and Coseley Building Society, which offers a 3-year fixed-rate deal at 3.29% with no fee.

Those seeking mortgage deals in the Midlands might consider checking their eligibility with the mutual, which is near unbeatable in this sector for smaller loan values (as shown in the table below).

But the wide-reaching Tesco Bank remains a strong option, and the option of low arrangement fees is a bonus.

The prospect of fixing for a third year is also a welcome one, as speculation mounts that the Bank of England will be forced to raise interest rates sooner rather than later.

85% LTV: How the Deals Compare

Monthly Payment

Average Cost per Year Over Deal Period

The tables show how the 3 year mortgages from Tipton and Tesco represent excellent value, especially for mortgages below £250,000. Though the 2 year deal works out well for higher value loans, consumers can opt for security and fix for a further year at relatively little extra cost.

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Mutuals are choosing to shun the Government's Help to Buy scheme, insisting that they can insure the high-risk mortgages they decide to advance to new buyers.

The Government’s flagship scheme has encouraged participating lenders to provide mortgages worth up to 95% loan-to-value by offering taxpayer-funded guarantees. Find out more about the scheme here.

Yet (as we’ve been keen to show), smaller banks and mutuals have offered better deals than larger competitors at most loan-to-value ranges, even after the launch of the flagship scheme last month.

Nationwide, Britain's biggest mutual, is ebullient about the performance of its mortgage range without the support of the new scheme.

Its latest figures show substantial growth in mortgage lending, with particular emphasis on first-time buyers.

Gross lending increased by 37% in the first nine months of 2013, to £14 billion, while the society supported over 30,000 first-time buyers – roughly one in five of all successful applicants – over the last six months of this period.

The increase in mortgages has been funded by a huge increase in the volume of savings held with the society, which rose by over £5 billion in the half-year to the end of September.

It also reports that the average LTV on its mortgage stock is less than 50%, emphasising the mutual’s close attention to risk management, despite the help it has provided to first-time buyers.

But avoiding the Government scheme has also helped the society to keep the costs down, according to executive director, Chris Rhodes.

"We are doing our bit and we don’t need support from the government," he said.

"Nationwide has continued to focus on first-time buyers and on promoting the link between saving and access to low deposit mortgage deals.

"As a result, we have increased our gross mortgages lending by over a third and our net mortgage lending by 75 per cent compared to the same period last year."

For the latest selection of Nationwide mortgages, see our dedicated mortgage page. You can also discover how these compare by checking out our comprehensive list of first-time buyer mortgages.

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The Government needs to support savers who are helplessly watching their funds deteriorate every year in real terms, says David Cutter, the chairman of the Building Societies Association.

Speaking on Friday, Mr Cutter said that Government schemes designed to improve the flow of credit had delivered a “profound” impact, resulting in both winners and losers.

Schemes such as Funding for Lending have been instrumental in boosting the housing market and consumer confidence. Equally, they have been detrimental to savers, who have seen the returns on their savings plummet far below the rate of inflation.

The Government needs to countermand this by implementing a number of measures to support savers, Mr Cutter told delegates at a BSA lunch.

Among a number of proposals submitted to the Treasury ahead of December’s Autumn Statement is an increase to the annual cash ISA allowance (currently £5,760) to match that of investment ISAs (currently £11,520).

A related proposal is allowing savers the ability to transfer funds from stock ISAs to cash ISAs. Currently, savers can transfer cash ISA funds to stock ISAs but not the other way around. This restriction has attracted criticism because it only benefits those willing to make risk-based investments.

Building a long-term savings culture

The BSA wants the Government to nurture a long-term savings culture by agreeing to match the amount that savers deposit into an ISA during its first year.

It also hopes to persuade the Government to enable the transfer of child trust funds into junior ISAs.

Millions of young children born between 2002 and 2011 are currently stuck with low-performing child trust fund accounts after they were granted a £250 head-start by the Government.

Consequently, they do not qualify for the more expansive and competitive range of junior ISAs.

The Treasury has already hinted that an announcement regarding these restrictions will be made before the end of the year.

Savers are "the bedrock"

Research carried out by the Treasury's savings arm, NS&I, has discovered that Britons have increased their monthly savings to £96, which further emphasises the importance of a flourishing savings environment.

Mr Cutter, also group chief executive of the Skipton Building Society, one of the few institutions to offer an above-inflation account, said: "Savers remain the bedrock on which our lending industry is based, and it is therefore vital to encourage and foster a long-term savings culture."

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The Government is being urged to quadruple the threshold at which stamp duty is introduced to £500,000.

Currently, stamp duty of 1% applies when a property is valued over £125,000. Properties valued over £250,000 incur a 3% charge, while those valued at £500,000 are charged 4%.

(Find out more in our express guide to stamp duty.)

Stamp duty has become a more pressing issue in recent months as cheaper mortgages and the Help to Buy scheme have driven property prices upwards.

Thousands of smaller homes for first-time buyers have now become eligible for the 1% charge, which starts at £1,250, while many more modest homes have also been driven up into the 3% category – worth a minimum of £7,500.

And with average house prices now approaching a quarter of a million (depending on which index is used), the average burden of stamp duty could soon be moving firmly into the 3% bracket.

But the Free Enterprise Group, supported by influential MPs including Treasury Committee chairman Andrew Tyrie, wants to abolish the tax for properties valued below £500,000.

The Group argues that withdrawing the tax on lower value properties would prove more helpful to first-time buyers than any of its incentive schemes.

Government Intervention

The Help to Buy scheme has encouraged lenders to support buyers with just a 5% deposit by offering a guarantee worth up to 15% of the mortgage.

While the scheme has been popular since its launch, it has also inspired competition in the market for higher loan-to-value mortgages.

Some of the best deals have been providers by local lenders, while the Nationwide – Britain's biggest mutual – has said that it is thriving without Help to Buy.

Other proposals by the Enterprise Group include axing National Insurance contributions for employers who take on unemployed workers under the age of 25. This would coincide with a three-year freeze in business rates, which would offer small businesses some stability.

However, more controversial proposals include lowering the rate of VAT to 15% and applying it to essential categories such as food and children's clothing, which are currently exempt from the tax.

Following calls to protect savers, the clamour over stamp duty and VAT will give the Chancellor plenty to think about as he prepares to deliver the Autumn Statement early next month.

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