Special Rates

DON’T be fooled by ‘special rates’. Lots of banks offer special deals for existing customers. But figures from research company Moneyfacts show that these tend to be the most expensive providers to start with. In most cases the reductions they offer to loyal accountholders aren’t enough to turn the deals into best-buys. Take a look at what your bank or building society is offering so you’ve got a benchmark for the interest rate you need to beat. But don’t think you can’t do better elsewhere.

Never assume there’s no point in looking around. The Moneyfacts research also shows that there is a huge gap in price between the cheapest and most expensive bank loans. People who pick the costly ones really are being ripped off – and there’s no need to join them. Unfortunately people who borrow relatively modest amounts of money tend to be charged the most. If you need to borrow, say, £5,000 over three years then you can pay as little as 5.8 per cent a year with some providers. But at the other end of the scale you can end up paying a staggering 20.6 per cent a year with the worse value loan firms. The gaps between best and worst providers aren’t quite as wide when you are borrowing more money. But they are still more than 10 per cent a year, even for those wanting loans of £20,000 or more. So watch out and don’t get ripped off.

Bank rates

The decision not to put the bank rate up again will be welcomed by borrowers. After a year at 4.5% then several rises in one year the bank rate of 5.75% is l.25% higher than this time last year. It is now hoped that the rates have peaked and possibly next year they will be on the downward trend.