Leeds Building Society has launched a new fixed-rate monthly income bond paying 4%, but savers will have to lock in for the next 10 years to reap the benefits.

Available from today, the bond pays a monthly return worth 4% per year on investments between £10,000 and £1,000,000 (£2,000,000 for joint accounts).

Monthly interest is paid on the last day of each month until December 2023, and must be paid out to a designated account or transferred to another account with the society.

As is customary for fixed-rated products, no withdrawals are permitted during the term. Savers will have to be sure that they are able to cope without their funds for the next decade.

Kim Rebecchi, the society’s sales and marketing director, said that offering a monthly income from savings offered an important distinction on existing products in the market.

“We have looked at the savings market and, in this historically low interest rate environment where many customers are on fixed incomes, there is a need to generate an income from their savings," she said.

"At the end of the product term, customers will have benefited from an income totalling 40% and still have all their capital.”

The bond’s gross return of 4% (3.2% net) is equivalent to eight times the Bank of England base rate. It surpasses the seven-year bonds from Secure Trust Bank, FirstSave Bank and the Skipton Building Society, which are currently offering between 3.50% and 3.52%.

Stick or Twist?

The new bond poses an interesting dilemma for savers. Industry experts traditionally warn against long term fixes in case any changes to market conditions leave savers trapped with uncompetitive deals.

In April 2011, the average five year bond was worth 4.17%, while in 2009, they were returning as much as 5.45%. This demonstrates how radically circumstances can change for savers given the state of the economy and other influencing factors.

And some changes may be afoot in the near future, if the Government meets calls to boost savers' tax-free allowance in the Autumn Statement next month.

However, savers have invested £37 billion into long-term bonds in their search for better rates, according to Leeds, as the performance of savings accounts continues to slide.

And regardless of future interest rate movements and their impact on the performance of savings accounts, basic-rate taxpayers who choose to invest in the new Leeds bond will be insured against the effects of inflation as long as it remains below 3.2%.

The Leeds 10-year fixed-rate monthly income bond is available from Wednesday 20th November.

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As many as one in five homeowners are taking advantage of low interest rates by overpaying on their mortgages, according to Santander.

Research by the bank has revealed that 19% of homeowners are overpaying on their mortgage by £181 per month on average.

It also found that 6% are making a single one-off payment worth an average of £1,919.

The figures show that homeowners are making inroads into their mortgage loans while rates remain at record-low levels.

Around one in four (24%) said they had overpaid in the last year, while around one in eight (13%) said they had started to overpay within the last six months.

Why overpay on your mortgage?

Mortgage rates have steadily fallen throughout 2013 to the lowest level in a generation.

This has allowed homeowners to agree cheaper mortgage deals for new purchases and to remortgage existing properties at much lower rates.

Homeowners can then elect to use some of the savings they would have made to overpay on their standard monthly payments and reduce the mortgage loan.

In the long term, this could save thousands of pounds on a mortgage and reduce the term by a number of years.

It is also a strategic move at a time when savings accounts are performing poorly. Homeowners could save far more through overpayments than they would otherwise accrue through the majority of savings accounts.

The best instant access savings account currently offers 1.9% (ignoring higher performing current accounts for now) – falling to just 1.52% after tax. Even with a much improved mortgage product, the interest rate is still likely to be double that amount.

So, it can easily prove a more efficient use of resources to pool extra funds into overpaying a mortgage while the conditions are suitable.

According to our early repayment calculator, overpaying £181 per month on a £200,000 mortgage at 3.5% would save £24,118 over the mortgage lifetime and reduce the term by five-and-a-half years.

(See how much you could save using our early repayment calculator.)

Does your mortgage allow overpayments?

Invariably, lenders will have different rules about overpayments, and it’s not always the best documented information.

Santander’s review found that around one in four (23%) had no idea about the options available to them, while one in seven (14%) knew that they could overpay on their mortgage but did not know the charges they would face.

In the first instance, the ability to repay may depend on the type of mortgage. Fixed-rate mortgages, especially those arranged within the last two or three years, are much more likely to apply charges for overpayments.

Tracker mortgages, while susceptible to interest rate changes, are more likely to allow overpayments without penalty, but a limit of 10% per year may still be applied.

Offset mortgages, though traditionally more expensive, tend to offer the greatest flexibility to repay more without incurring charges.

Those who are considering making overpayments on their mortgage should consult their terms for more details about any charges that would be applied.

Check out our guide to fixed rate vs. variable rate mortgages for more details.

How important is overpaying for you?

If you are considering changing your mortgage in the near future, ask yourself whether the ability to overpay might influence the type of mortgage you should pursue.

A change of mortgage may also prove to be a useful opportunity to make a one-off payment to reduce the loan at the point of switching.

Homeowners who are able to reduce the value of their loan at this juncture may be fortunate enough to reduce their loan-to-value ratio down to a lower threshold and benefit from a better rate in the process.

Check out our whole-of-market coverage for details of all available mortgages.

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A number of new mortgages launched by the Yorkshire Building Society and its subsidiaries are offering buyers even better rates than the Government's Help to Buy scheme.

New deals have been made available through Yorkshire, Barnsley, Accord, Chelsea, and Norwich & Peterborough, increasing the total number of 95% mortgages available to new buyers by around 50% overnight.

The announcement aligns the Yorkshire Group with Nationwide, which has also shunned Help to Buy.

Britain’s biggest mutual said this week that it did not need the scheme to assist first-time buyers, adding that the cost of insuring Help to Buy mortgages made the loans more costly for consumers (read more).

The Yorkshire Building Society’s 2-year fix at 4.89% is cheaper than the best Help to Buy deal currently available at this term (4.99% through RBS/NatWest). The product does have a £130 product fee, but successful applicants will receive £500 back in cashback from the lender.

The Norwich & Peterborough Building Society is also offering a 4.89% deal for two years, with no arrangement fee. The product also offers a free valuation and a £500 rebate, making it another very attractive proposition.

Those wishing to fix for longer might be encouraged by Yorkshire Building Society’s 5-year fix at 5.09%, with a fee of £975.

The 5-year deal comfortably outperforms the best Help to Buy deal at this term (5.49% through RBS/NatWest), while it also beats off stiff competition from the Leeds Building Society, which offers a 5-year fix at 5.19% (£999 fee).

Local Lenders

More impressive yet is that several of these deals from the Yorkshire Group are themselves outperformed by local lenders.

The Furness Building Society is offering an outstanding 5-year fixed-rate 95% mortgage at just 4.75% with no fee.

The one downside here is that the mortgage can only be applied for in branch, which is only likely to benefit those in the North West and Cumbria (pictured right).

The Loughborough Building Society is also offering an impressive 5-year deal, at 4.99%, with just a £99 fee.

The downside here is that the low maximum loan size (£150,000) will limit the number of properties for which this product will be eligible.

So, as we’ve advocated before in our guide to Help to Buy (under ‘Are there any alternatives?’): if you’re looking to move on to the housing ladder, it’s worth drawing up a shortlist of local lenders in the region.

Though eligibility can be more limited when it comes to mutuals, the added competition for first-time buyers provided by Yorkshire Building Society and its associates demonstrates that Help to Buy is not the only (or the cheapest) option for first-time buyers.

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More than six in 10 consumers have said they are aware of the new seven-day current account switching service, as the new service gathers momentum.

A recent study by Industry Branding has gauged consumers’ options of the banking industry two months after the launch of the new £750 million system.

The survey revealed that 62% of respondents were aware of the new switch service, which allows customers to transfer bank accounts within seven days and guarantees to refund customers if anything goes wrong.

One in five said they were more tempted to switch banks as a result of the new system.

(Find out more about the new current account switch system here.)

What are banks doing to win your custom?

The scheme has boosted competition in the market for current accounts, with banks eager to tempt disillusioned customers to switch using the new system.

In August, RBS and NatWest revealed that customers who register for a new rewards scheme would be able to earn cashback through using their debit cards (read more).

Halifax also joined the cashback brigade in the summer, with a new Cashback Extras scheme allowing customers to earn between 5% and 15% on selected items at participating high street stores (read more).

The accounts compete with Santander’s popular 123 current account, which offers both cashback and interest worth up to 3%. Santander has revealed that over one million new customers have signed up for the account in 2013.

Popular with survey respondents was the Nationwide Building Society, with almost half (44%) rating the mutual as one the best brands.

The society’s FlexDirect account offers a stunning 5% interest on balances up to £2,500 in the first year, which is far and above any returns available through easy-access savings accounts.

But the reputation of the beleaguered Co-operative Bank has taken a hefty blow, following revelations about its precarious capital position and the announcement that an inquiry will be launched into the appointment of former chairman Paul Flowers.

Only one in four (27%) now rate the ethical bank as a reputable brand.

Interested in what banks are offering? Check out our current account page!

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The cost of payday loans will be limited by new legislation, the Government has announced.

Chancellor George Osborne said a law to cap the cost of payday loans would need to cover the overall cost – including arrangement fees and charges – rather than just the interest rate.

It will be added to the Banking Reform Bill, which is already set to go through Parliament.

Payday lenders have come under fire for interest rates approaching 6,000% APR, as well as past allegations of inadequate credit checks and intimidating behaviour.

Lenders have argued that these sky-high rates do not accurately represent the charges for short-term lending.

But the practice of ‘rolling-over’ loans, which is also standard in the industry, allows these charges to escalate.

The new law will require the City regulator, the Financial Conduct Authority, to make decisions regarding price controls for the payday lending market.

It will decide the level of the new cap when it assumes control of the industry in April 2014.

The announcement follows a Parliamentary consultation earlier this month, where members of the Business Select Committee spoke to trade bodies, consumer groups and regulators about the nature of the controversial industry.

Lenders' representatives claimed that only a small percentage of loans were provided to people who encountered financial difficulties, and that the current setup provided flexibility for customers.

But consumer groups and regulators both expressed concerns that lenders' ethics only extended to what worked for the industry (read more).

James Booker
Which4U

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HSBC is to join the Help to Buy ranks this week, undercutting other major lenders participating in the scheme.

The bank’s new range of 95% loan-to-value mortgages will include a 2-year fix at 4.79%, and a 5-year fix at 4.99%. Both products require a £99 booking fee.

These deals comprehensively outperform the two major banking groups currently signed up to the Government scheme.

Halifax and the Bank of Scotland (Lloyds Banking Group) have both offered a 2-year fix at 5.59% with no fee, or a 5.19% deal with a £995 fee. (How do I work out the best rate / fee relationship?)

RBS and NatWest are both offering a more competitive 4.99% for two years, and 5.49% for five years, with no fees involved.

But a borrower seeking a £150,000 mortgage for two years would save £318 with the new HSBC deal over RBS or NatWest, and a whopping £1,595 on the Halifax deal.

Competition

Heated competition in the market for low-deposit mortgages has not been restricted to the Help to Buy scheme, however.

A host of new 95% mortgages was made available last week by the Yorkshire Building Society and its associated brands (read more).

The Yorkshire Building Society unveiled a 2-year fix at 4.89% (£130 fee), which is now undercut by HSBC. On a £150,000 mortgage, HSBC would be £239 cheaper over the cost over the deal period.

However, the sting in the tale is Yorkshire’s £500 cashback offer, which makes the mutual's deal the cheaper of the two on this occasion.

Local Lenders

HSBC is also outperformed by select local lenders for its longer 5-year fixed-rate deal.

The Furness Building Society, based in the North West and Cumbria, is offering a 5-year 95% mortgage at just 4.75% with no fee. Unfortunately, the mortgage can only be applied for in-branch, which will limit its appeal to those who live in the region.

The Loughborough Building Society also matches HSBC’s rate and fee (4.99% / £99) over five years, though a low maximum loan size of £150,000 limits the number of eligible properties.

The deals show how smaller lenders and mutuals are making banks work harder to make their Help to Buy deals more competitive.

And while it is useful for first-time buyers that another major bank has entered the fray, undercutting its rivals in the process, there are still some local and potentially cheaper alternatives available.

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Barclaycard has scaled back its maximum 0% balance transfer duration to 29 months, but it remains the longest offer on the market.

The lender has reduced the maximum term on its balance transfer card just four weeks after extending it to 30 months.

The card remains the market-leading 0% balance transfer offer for duration, despite the cutback. But a host of rivals will now be sensing an opportunity to capitalise with their alternatives.

Earlier this month, Halifax improved its offer to 28 months at 0% on balances up to £3,000, joining RBS, NatWest and Tesco on the heels of Barclaycard (read more).

And Halifax's competitive balance transfer fee of 2.45% now makes the card a genuine contender.

This is recognised by Barclaycard, which has also reduced its balance transfer fee from 2.90% to 2.79% (like Halifax, achieved by a part-refund).

To transfer a balance of £3,000 with Halifax would cost a new customer just £73.50, while it would cost £83.70 with the revised Barclaycard.

Since one additional month at 0% costs an extra £10.20 with Barclaycard, the Halifax card now appears to offer better value in this regard.

Both cards, alongside the RBS and NatWest Platinum, offer 0% on purchases for six months.

This will ease the pressure over the festive period for those who anticipate adding to their balances.

But consumers may still wish to consider alternatives, such as the Bank of Scotland’s 24-month 0% Platinum Card with its low transfer fee of 1.50%.

There is also the excellent Halifax All-in-One card, which offers 0% on balance transfers and purchases for 15 months for a transfer fee of just 0.8%.

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Mortgage lending approached the £10 billion mark in October, according to the British Bankers' Association (BBA) – 32% higher than October 2012 and the highest level in almost four years.

The number of house purchase approvals in October showed an increase of 33% on last year, while remortgage approvals showed an 18% increase.

The BBA attributed the strong year-on-year performance to the Funding for Lending and Help to Buy schemes, which have improved the availability and affordability of mortgages at all loan-to-value ranges.

However, on a month-to-month basis, the total number of mortgage approvals fell slightly from September, while net borrowing also fell.

House purchase approvals fell for the first time in seven months to 42,808, the BBA announced, defying economists’ expectations that they would rise to 45,000.

The fall in net borrowing reflected the new trend of homeowners overpaying on their mortgages, the BBA suggested, as consumers took advantage of lower interest rates to pay back £167 million more than they borrowed. (Read more about overpaying here.)

Howard Archer, the chief economist at HIS Global Insight, suggested that people may have started "easing back" on borrowing ahead of Christmas.

There are also suggestions that buyers might be waiting for other lenders to join the Help to Buy Scheme in January, which may deliver more competitive rates.

HSBC became the latest Help to Buy participant this week, offering rates that undercuts all its major rivals.

With Barclays and Virgin Money among those to follow in January, it may be hoped that the influx of competition will push rates lower in the new year.

Commercial Lending Falls

Lending to businesses also fell in October, raising concerns about the robustness of the recovery.

The news comes as Britain's state-supported banks face accusations of pushing solvent firms into default to profit from their assets.

Dr Archer described the commercial lending figures as "very disappointing".

"It remains to be seen if October's relapse in lending was at least partly a correction after the jump in lending in September," he said.

"But it is nevertheless a setback to hopes that banks are becoming more prepared to lend to businesses given the improved economic situation and outlook."

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Payday lenders will have to urge borrowers to seek debt advice on future adverts, the Government says, as new evidence finds mortgage lenders reluctant to consider applications from those who have taken out a short-term loan.

Under new proposals, lenders will have to warn prospective borrowers about potential negative consequences for their credit scores, said Business Secretary Vince Cable.

The proposals come amid concerns that consumers are not always fully aware of the ramifications for their credit file if they apply for a payday loan.

Like other forms of credit, payday loans remain on a borrower’s credit history for six years. But even if a borrower repays the cash without any trouble, mortgage lenders are still more likely to reject an applicant outright if they see evidence of payday loan activity.

Mortgage lenders are discouraged by payday loan activity on a credit file as it appears to imply that a borrower has run close to their financial limit or that they lack the ability to manage their finances effectively.

Recent figures amassed by Monetary Strategy show that mortgage applications were more likely to be dismissed out of hand if the applicant had a payday loan on their credit file.

The industry magazine found that of 279 brokers, two thirds (184) reported that their clients had been negatively affected in this way.

It is hoped that more direct warnings on adverts will help to keep consumers more aware about the consequences of their lending decisions and how they may be interpreted by mortgage lenders in the future.

The Consumer Finance Association, which represents a number of prominent payday lenders, said it would consult with credit reference agencies about whether it was a lender’s duty to warn consumers about the consequences of applying for a loan.

The news follows the recent announcement that the cost of payday loans is to be capped.

Under new legislation, which will be added to the Banking Reform Bill, the cost of loans – including arrangement fees and charges – will be capped at a rate to be determined by the Financial Conduct Authority when it assumes control of the industry in April 2014.

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Lending to first-time buyers has improved this year, but the Help to Buy scheme is still not solving the woes of the housing market, says the Bank of England Governor.

Figures from the Council of Mortgage Lenders (CML) show that lending to first-time buyers has increased significantly in the third quarter, especially in London.

The number of loans advanced to new buyers in the capital between July and September increased by almost a third (32%) on the same period in 2012.

The CML’s director-general, Paul Smee, said that first-time buyers had been “the key driver in the first half of the year in London”.

But the value of loans went up by more than 40% on last year’s Q3 total, as new buyers found themselves needing to borrow more.

First-time buyers borrowed an average of £198,000 across the quarter – a sizeable increase of 2.75% on the average of £192,700 advanced during the previous quarter.

And with a similar pattern expected following the early launch of the Help to Buy scheme in October, the Bank of England Governor Mark Carney said that the new scheme was highlighting the key problem of supply.

The scheme has been designed to improve the availability and affordability of high loan-to-value mortgages, allowing first-time buyers a greater opportunity to join the housing ladder.

But without a boost to the supply of new housing, the market will drive prices back out of the reach of aspiring young buyers.

Speaking to the Treasury Select Committee yesterday, Dr Carney told MPs that there was no evidence of a credible strategy to increase the number of new homes.

His testimony turned the tables on accusations from Labour MP John Mann that he had become too close to the Chancellor, which Dr Carney said had left him feeling 'more than mildly offended’.

You can find out more about Help to Buy here and view all the mortgage deals available through the scheme here.

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The Nationwide Building Society is the latest institution to announce that it is simplifying its old savings accounts to improve transparency for savers.

As part of a widespread clean up of its old accounts, the society’s ‘notice’ account range will be reverted into a single flexible account called an ‘Instant Saver’.

The move is expected to impact 2.5 million – around a quarter of the mutual’s savers – some of whom will see a name change to their account, and some of whom will be switched over completely.

The first stage of the clean-up process will see the society cut the number of savings accounts by almost two-thirds.

From December 11, accounts including the 75- and 90-Day Saver range, the Champion range, and the Bonus (30) range will be discontinued and replaced with three simple accounts: an ‘Instant Saver’, an ‘Instant ISA’ and an e-ISA account.

But no customers will face a rate cut as part of the changes, the society claims, which comes as welcome news following similar moves by banks that have coincided with rate cuts for millions of savers.

Over a million customers with RBS and NatWest recently discovered that returns on their tax-free ISAs were to be cut by up to 1% as part of the bank’s standardisation of old ISA accounts to the latest issue.

While some high-value investors are to benefit from the changes, the government-backed bank said that the higher returns of up to 2.25% on existing accounts were "unsustainable in the current market" (read more).

Other Nationwide moves to improve transparency include displaying rates conspicuously on online accounts, making it easier for savers to find out what they are earning by logging in.

It is also improving accessibility, allowing savers to benefit from online access to their accounts, even if they were opened in branch.

Across the market, instant access accounts are currently offering just 1.60%, with easy-access ISAs faring slightly better at 1.80%.

Those willing to lock away their money for 12 months can find ISA deals at 1.91%, while a new bond from Shawbrook Bank promises to return 1.95% after twelve months.

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The Nottingham Building Society has reduced a number of its discounted rate mortgages, adding further competition to the market for higher loan-to-value categories.

With the Bank of England describing the Funding for Lending Scheme as ‘no longer necessary’, it will come as reassurance to homebuyers that local lenders are still keen to compete with big-name lenders.

Among the pick of Nottingham’s new offers is the 3-year discounted variable rate mortgage at 80% loan-to-value, which is now available at just 2.59%.

The society has increased its fee to £999, but only £199 of this is required at the point of application, with the remaining £800 to be added to the mortgage.

Nottingham also offers a free property valuation, while remortgage applicants will benefit from free legal fees.

The deal adds to a strong Midlands contingent, with strong offers still available at this loan-to-value range from the Loughborough and West Bromwich Building Societies, and also from Marsden Building Society, based in the North West.

West Brom continues to offer the pick of the deals, with a 2-year fix at 2.39% (£299 fee) on loans up to £500,000.

For new buyers: 90% loan-to-value

Other promising discounted rates from Nottingham include the 3-year discounted variable rate 90% mortgage, which is available at just 3.99%.

With a fee of just £299, plus valuation and legal fee incentives, this deal offers serious competition to major lenders, most of whom are only currently matching this rate with much higher fees.

HSBC’s High Street Special offers 3.59% on a 2-year fix for buyers with a 10% deposit, but the product fee of £1,499 is a steep blow to the pocket.

The Post Office matches Nottingham with a 2-year fix at 3.99%, but once again buyers face a hefty charge of £1,495 to clinch the deal.

On a £150,000 mortgage, the Nottingham deal works out over £400 cheaper than HSBC for the first two years, and almost £1,200 cheaper than the Post Office over the same period.

However, this saving would be compromised if the rate was forced up by an increase to the Bank of England base rate over this period.

(How can I work out the best deal accounting for mortgage rates and product fees?)

Closer competition is offered by the Nationwide, which is offering a 2-year fix at 3.89% with a £900 fee, and similar product specifically for first-time buyers, which is priced at 3.99% with a £400 fee.

But cheaper mortgages are still available through the Monmouthshire Building Society. The mortgages are only available for a maximum loan of £200,000 and are limited to homebuyers in parts of Wales and the South West, but anybody who meets the criteria will struggle to find a better deal elsewhere.

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Getting more people onto the housing ladder has led Brits to accumulate a record level of debt.

According to Bank of England figures, individuals owe a grand total of around £1.43 trillion, which overtakes the previous record set prior to the financial crisis.

The figures are propelled by higher mortgage debts, which have risen steadily as a result of several government-backed schemes.

Conditions have continued to improve for first-time buyers, which is where the larger debt values have emerged.

Average rates on a 2-year fixed rate mortgage at 90% have fallen to 4.42% in October, the Bank’s figures show. This shows a fall from 4.56% in September and from 5.64% in October 2012.

The Bank announced yesterday that the support offered to the mortgage market through the Funding for Lending Scheme would end in January, when the function of the scheme would be redirected towards lending to businesses.

The Bank’s governor, Mark Carney, said there was “no longer a need for FLS to provide further broad support to household lending”, as credit conditions have improved for lenders.

Unsecured Lending

Unsecured lending, which has risen in line with the recovery, showed a slight fall in October.

A drive in consumer spending is thought to have propelled the 0.8% growth in GDP recorded in the third quarter.

But unsecured lending rates are continuing nudging upwards again. Average credit card rates remain close to 18% - over half a percentage point higher than October 2012 – while average overdraft rates remain above 19.5%.

Rates on personal loans worth £5,000 reached a low of 10.11% in August after registering an average of 14.03% last November. But they have since risen to 10.36% in October.

Rates on personal loans worth £10,000 have risen to an average of 6.25% in October after reaching a low of 6.10% in July. However, rates are still well below the average of 7.48% recorded in October 2012.

We’ve seen plenty of opportunities for homeowners to reduce their mortgage rates as rates have fallen over the last 12 months. But credit card rates show no signs of following. Can you reduce your credit card debts at a lower rate through a 0% balance transfer offer?

Check our listings today!

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House price inflation remains strong, but Brits should avoid committing themselves to a mortgage that they won't be able to repay if interest rates go up.

The latest Nationwide House Price Index shows that average UK house prices rose to £174,566 in November, 6.5% higher than the same month in 2012.

While prices remain around 6% lower than their peak level in 2007, the current level of inflation is the strongest recorded since July 2010, after being relatively flat for the first half of the year.

The rise in inflation has been attributed to the rise in demand for housing as mortgages have become cheaper and more readily available.

The number of approvals for house purchases reached 66,735 in September – a 34% increase on the same month last year.

Nationwide’s chief economist Robert Gardner said that improvements to the labour market and the economy had boosted confidence among buyers, while policy measures aimed at improving the cost and availability of mortgages were also “playing an important role”.

The fall in the average cost of a 90% loan-to-value mortgage, from 5.64% in October 2012 to just 4.42% in October 2013, has prompted a reduction in typical monthly payments of £110 at the current average house price, he added.

Beware Interest Rate Rises

But the Bank of England Governor Mark Carney has warned aspiring homeowners that they need to be able to pay their mortgages when interest rates go up and not rely on future intervention to help them out.

Some on short-term fixed-rate deals will encounter a leap in their rate following the expiry of the offer period. Those who take out the new Post Office 90% mortgage at 3.58% will revert to a subsequent rate of 4.49% unless they secure a new deal.

Those with variable rate or tracker mortgages remain vulnerable to any change in the Bank of England base rate, though they may have more flexibility to overpay their mortgage at the lower rate.

(For more details, check out our guide: fixed-rate vs. variable rate mortgages.)

The Governor’s warning follows the Bank’s announcement that the Funding for Lending scheme would no longer be supporting the residential mortgage market from January 2014.

He has advised future homeowners to think carefully about the debts they were taking on with a new mortgage, and not to expect any assistance in the event that interest rates head upwards in the forthcoming years.

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Brits are beginning to warm to the idea of changing their banks, as greater numbers use the new fast-track switching system to switch their current account.

The new switching system was launched in September to improve efficiency and cut the time required to switch bank accounts from up to 28 days to just seven days.

The new £750 million service ensures that inbound and outbound payment instructions from an old account are forwarded to a new account, while customers will also be refunded if anything goes wrong during the transfer.

(Find out more about the new switch system here.)

The response to the new system was relatively modest. The number of switches completed in the four weeks following the launch was 11% higher than the number that took place during the equivalent period in 2012.

But the number of switchers has steadily risen, according to the Payments Council, with over 115,000 applying to change their current account in October – a 12.7% increase on the 102,300 that switched during October 2012.

And the momentum appears to be growing. 35% who switched this year have done so within the last three months, according to the TNS Global current account switching index.

Winners and Losers

The figures also suggest that customers are fleeing traditional high-street banks, with poor customer service, high rates and charges among the reasons for leaving.

Though Lloyds TSB has gained 14% of switchers, it has lost 20% to other banks. HSBC has also lost out heavily, gaining just 4% of switchers compared to the 11% it has lost.

First Direct, which offers a £100 joining bonus, is making small inroads, gaining 2% of switchers, while Nationwide has seen 11% of switchers joining its ranks.

Customers have been seduced by special offers and rewards, with 26% highlighting these as the principal reason for joining another bank.

The most popular choice for switchers has been Santander, with its 123 current account offering a unique combination of cashback and interest worth up to 3% (find out more about the account here).

Despite losing 9% of switchers, many due to poor customer service, the bank has seen an influx of customers willing to reap the rewards offered by the generous current account.

TNS has identified Nationwide as a standout performer in the early months of the switching system.

The society’s offers include the FlexDirect account, which pays 5% interest on balances up to £2,500 in the first twelve months, and the new packaged FlexPlus account, which offers interest of up to 3% alongside a host of comprehensive policies.

Maureen Duffy, the chief executive of TNS UK, said it was proving a good fit for customers. "In this latest wave, Nationwide seems to be achieving the best balance between service and value as they both feature in their reasons for choosing Nationwide", she said.

"It will be interesting to see if that can continue."

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The Royal Bank of Scotland has apologised after a technical glitch left customers unable to make online or card payments for around three hours on Monday evening.

The technical glitch affecting RBS, NatWest and Ulster Bank customers disrupted systems between 18:30 and 21:30 in the evening, preventing customers from making purchases and accessing their funds.

The bank said it did not know what had caused the glitch, but assured customers that systems are back to normal. However, some customers have reported abnormalities in their balances on Tuesday.

The bank has promised to compensate any customers that have been left “out of pocket” as a result of the downtime.

Long Series of Problems

The glitch is the latest in a series of embarrassing technical problems to have affected the bank in the last 18 months.

In June 2012, problems caused by a software upgrade locked customers out of their accounts for several days, with Ulster Bank the worst affected.

The resulting backlog of up to 100 million transactions meant that payments in and out of accounts were delayed by several days, causing widespread disruption.

Just one month later, in July, a separate problem left customers unable to access their accounts or pay for goods using debit cards.

The bank experienced a further glitch earlier this year, which prevented customers from carrying out basic banking services.

Customer Service

The issues are a challenge for the group’s new chief executive, Ross McEwan, who faces an uphill battle to retain customers following the launch of the new seven-day current account switching system in September.

The latest TNS UK current account switch index has revealed that 17% of those who have switched using the new system have deserted RBS and NatWest for other banks.

Mr McEwan has spoken about the need for the bank to change its customer service. This is an issue that clearly resonates with customers.

Poor service has been identified as the most significant issue that has driven customers to leave their bank, according to the TNS Index. Almost one in four (22%) cited poor service as the main reason for switching to a new bank.

Are you fed up with RBS and NatWest’s frequent technical glitches? Would you consider changing bank accounts for a more reliable service? Find out more about how easy it is to switch accounts through the new seven-day current account switching system!

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The Post Office has reacted to competition from local lenders by launching an impressive new fixed-rate mortgage at 90% LTV.

The lender has replaced its previous 2-year fix for first-time buyers (3.99%) with a new mortgage at just 3.58%.

A cheaper deal at this loan-to-value ratio is currently available through the Monmouthshire Building Society (3.49%, with no fee), but the Post Office’s deal is more widely available and has fewer restrictions.

Customers face a hefty £1,495 fee to secure the mortgage, which makes the deal less competitive for smaller value loans but very competitive still for higher value loans.

Competition at 90% LTV

Despite the recent announcement that the Funding for Lending Scheme will no longer support residential mortgage lending from January 2014, lenders are continuing to push through impressive offers for first-time buyers.

The decision by Nottingham Building Society last week to reduce a number of its discounted rate mortgages for those with 10% deposits gave the lender a strong position in the sector.

But the Post Office’s new deal, which undercuts HSBC marginally in rate and fee (3.59% / £1,499), grows increasingly competitive as the size of the loan grows higher.

As the table here shows: for a £150,000 mortgage at 90% loan-to-value, the Post Office is surpassed by three cheaper deals (measured by the cost per year during the initial offer period).

For a £250,000 loan, however, the Post Office becomes cheaper than rivals, because the savings to be made from a lower interest rate offsets the higher fee as the value of the loan goes up.

For buyers wishing to fix for longer as the threat of rising interest rates grows, the Post Office has also improved its 3-year fix at 90% to just 3.94%, which is also one of the best rates in the sector.

For more about how fees affect the cost of a mortgage deal, check out our guide. You can also view a full list of Post Office mortgages here.

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Long-suffering customers of RBS and NatWest can wave goodbye to impromptu technical faults by switching to a new bank in just seven days.

The bank has apologised after its latest glitch on the evening of Cyber Monday left customers of the banking group without access to their cash and unable to make electronic payments.

Websites and smartphone apps were also affected during the downtime, which lasted between approximately 18:30 and 21:30 on one of the busiest shopping days of the year.

Customers continued to report irregularities on Tuesday, with some finding large sums missing from their accounts.

This is the fourth incident in just 18 months, following a faulty software upgrade in June 2012, which caused widespread problems for individuals and businesses.

Ross McEwan, the new chief executive at RBS, has admitted that for decades the bank has “failed to invest properly in its systems”.

He accepted the sequence of glitches was “unacceptable” and said that the bank is working “to put our customers’ needs at the centre of all we do”.

The warning signs have been evident for some time, however. Last year, regulators described RBS’s systems as ‘chronic’, while both Santander and Nationwide shunned a deal to acquire 316 branches from the banking group, citing concerns with IT integration.

Compensation and Repercussions

The bank has promised to reimburse customers who have been adversely affected by the latest system failure. This means, for example, that any fines resulting from the late payment of a bill will be refunded.

Likewise, any charges resulting from customers having to withdraw cash from alternative sources, such as a credit card or dipping into an overdraft, will be refunded.

It is to be expected that customers will need documentation to prove that they have been charged, so statements and receipts will come in handy for any claim.

It’s also a wise move for customers to consult their credit reports if any bills have been paid late through no fault of their own. As with previous occasions, RBS has said that it will work with credit reference agencies to ensure that nobody is negatively affected by the latest fault.

But the consequences of a black mark could be serious – impacting the ability to apply for a mortgage, for example. It’s not worth taking too many chances.

Fed up? It’s easy to switch!

RBS’s confession about its investment shortfall is hardly a surprise, and it’s laudable that the bank is making efforts to rectify its weaknesses. But it’s hardly unreasonable for customers to consider their options given the circumstances.

Banks are vying for our custom, and we expect the fundamental systems to remain functional at all times. If an airline said it had underinvested in its systems for decades, you can be sure that most would seek an alternative. If it suffered four failures, the consequences for its business would be catastrophic.

The integrity of RBS’s systems has been compromised four times in just 18 months. And the knowledge that more failures could follow as the bank hastily catches up after decades of underinvestment hardly inspires confidence in reliability for the immediate future.

Banks used to be able to get away with this, when a drawn-out switching system deterred customers from switching banks. But now, thanks to a new seven-day switching system, you can be sat pretty with a new bank account in just a week.

All inbound and outbound payment instructions will be automatically forwarded, and the new system comes with a guarantee that will reimburse customers if anything goes wrong.

Among the current accounts currently available are Nationwide’s FlexDirect account, which offers a stunning 5% in interest on balances up to £2,500 for the first twelve months, and the Santander 123 current account, which offers both interest and cashback worth up to 3%.

• Find out more about the current accounts on offer here.
• Find out more about switching accounts with the new system here.

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A summary of the measures addressed in today's Autumn Statement.

Growth

• GDP to grow 1.4% in 2013. Growth revised upwards from 1.8% to 2.4% for 2014.
• Growth coming from higher consumer spending.
• Office of Budget Responsibility still expects Eurozone to shrink.
• Coalition looking to boost export opportunities in fast-growing emerging markets.

Debt

• Borrowing is lower than expected this year – down to £111 billion.
• Debt will continue to rise for foreseeable future, peaking at 80% of GDP in 2015/16. By 2018/19 on this measure, will reach account surplus.
• “Cyclical improvement” – debt not dissolving when growth returns.
• Department budgets to be reduced by £3 billion – not applied to local government.

Tax

• Confirmation that personal allowance up to £10K next year.
• “Measures” to tackle tax avoidance / evasion, expected to raise £9 billion over five years.
• Capital gains tax to apply to non-residents selling property from April 2015.
• A rise in the bank levy to 0.156%, raising £2.7 billion in 2014/15.

Pensions

• Pension age to keep track with life expectancy, rising to 68 in the mid-2030s.
• State pension to rise by £2.95 a week next year.
• Opportunity will be made available for extra NI contributions to improve income in retirement.

Businesses

• Business rate rise to be capped at 2% next April.
• Relaxation of rules that discourage small/local firms from taking up new premises.
• For next 2 years, every business with rateable value up to £50K will receive £1,000 cut to rates.
• Employer NI exemption for under-21s.

Education

• Infant school meals for first three years.
• 30,000 further university places next year, with cap to be lifted altogether.
• Measure to be funded by selling the old student loan book.

Welfare / Spending

• New approach from JobCentre Plus to help 16/17 year olds without qualifications.
• 18-21 year-olds signing on without basic skills required to take training.
• Cap announced to overall welfare spending, with cyclical benefits excluded.

Infrastructure

• £1 billion in loans to unlock large housing developments to tackle weakness of housing supply. Regeneration of run-down housing estates.
• Funding for Lending Scheme to relocate to small business lending. Virgin and Aldermore to join alternative Help to Buy stimulus.
• Renewed commitment to invest in A14 (Suffolk).
• Commitment to investment in alternative energy sources such as shale gas and offshore wind power.

Extra

• Average rail fares to rise in line with inflation in 2014 (rather than RPI + 1%).
• £100 million of Libor fines to be made available to military charities.
• Next year's fuel duty rise to be scrapped.

The economic plan IS working, said chancellor George Osborne today as he delivered the 2013 Autumn Statement.

The chancellor said that growth predictions had improved – to 1.4% in 2013 and to 2.4% in 2014 – but that the government was determined not to repeat mistakes of the past and threaten the stability of the recovery.

Mr Osborne spoke repeatedly of "difficult decisions", arguing that austerity had to continue in order “to repair the roof while the sun is shining”.

The fall in growth had been more severe than expected during the depths of the financial crisis, he revealed. Trade and export levels remain low as Eurozone growth and global trade levels have continued to struggle.

Public Finances

In a triumphant tone, the chancellor insisted that the Government had gained control over spending levels, but conceded that there were more cuts to be made.

As a result of improved conditions, borrowing will be £9 billion less than expected this year. On the current trend, there will no longer be a need to borrow in five years’ time, Mr Osborne said.

Crucially, however, the improvement was described as “cyclical”, suggesting that debt will not simply disappear with the return to growth, and will continue to rise for the foreseeable future.

Consequently, departmental budgets will be reduced by a further £3 billion, though schools, health spending will be protected. Local government spending will also be excluded to allow for a council tax freeze next year.

A cap in overall welfare spending was announced, while the bank levy will also rise slightly to raise £2.7 billion per year.

Non-UK residents are to be charged capital gains tax on housing transactions from April 2015, while the chancellor also announced measures to deal with tax avoidance and evasion.

One of the more controversial measures was an announcement to a rise in the pension age to 68 from the mid-2030s, which is vital to maintain a sustainable public pension system, the chancellor said.

Giveaways

Among the new measures to be announced – although few were unexpected – was the introduction of free school meals for infant school children and the married couple’s tax allowance. (See a summary of the measures here.)

The 2p rise in fuel duty due in 2014 will be scrapped, while rail fares will only rise in line with inflation from January (3.1%) rather than the expected 4.1%.

The chancellor announced that 30,000 more student places would be made available next year, and that the cap on student places would be abolished. This would be funded by selling off the existing student loans book.

There was no help for savers, however, with no mention of the tax-free ISA allowance or the long-campaigned move to allow child trust funds to be converted into junior ISAs.

Businesses, Investment and Productivity

Much of the chancellor’s statement was focused upon measures for businesses and improving productivity.

Business rates will rise by 2% next April, he said, rather than the expected 3.2%, while every business with a rateable value of up to £50,000 will receive a £1,000 cut to their rates for the next two years.

The chancellor also acknowledged that the high street was still struggling as more people choose to buy over the internet.

He announced measures to support small firms taking up new premises, including a “re-occupation relief” that would halve rates for businesses taking up occupancy in vacated or derelict property.

Businesses have also been encouraged to take on young workers, with employers’ National Insurance contributions scrapped for employees under the age of 21.

20,000 additional apprenticeships are to be funded over the next two years, while young people signing on without qualifications will be made to undertake training or risk losing their benefits altogether.

The chancellor confirmed that the Funding for Lending Scheme would be focussed upon small business lending from January 2014, as the Government seeks to boost the availability of credit to support business investment.

However, the Help to Buy scheme will remain as a stimulus to first-time buyers, with challenger banks Virgin and Aldermore set to join the scheme later this month.

The chancellor identified the supply of housing as a ‘weakness’, announcing £1 billion in loans to unlock large housing developments and regenerate run-down housing estates.

He also confirmed the Government’s commitment to invest in alternative energy sources such as shale gas and offshore wind power, as many continue to worry about the cost of energy bills.

Reaction

Shadow chancellor Ed Balls attacked the fall in living standards, contesting that consumers were now £1,600 a year worse off since 2010.

He said the recovery was regional, with most people not feeling any sign of recovery at all.

Young people were being forced to take on part-time work, he said, as there were not enough full-time posts available. He called for a compulsory bank bonus tax to fund more jobs for young people.

Business leaders were more optimistic about the statement, however.

Helen Dickinson, Director General of the British Retail Consortium, said the smaller rise in business rates would help firms raise their investment levels in the coming year.

"The chancellor has recognised that businesses are suffering and is right to listen to retailers' concerns on business rates,” she said.

“With fuel duty frozen, £1,000 rebate on business rates and a subsidy on employing young people, there are measures worth thousands to small businesses,” added Alexander Jackman, the Head of Policy at the Forum of Private Business.

But fundamental concerns remain at the lack of measures taken to address wholesale energy prices, while savers are also neglected as consumer spending continues to prop up the economy.

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