Quantitative easing was launched earlier this year in a bid to ease the funding shortage which has been affecting the availability of loans and mortgages. Today's decision to extend the programme with an additional £25billion means that £200billion has now been committed to this cause.
Also this week, we've seen more government money being used to help stabilise Royal Bank of Scotland and Lloyds Banking Group. For more on this, read our article 'What the will the bank break-ups mean for you?'.
Both of these moves underline the fact that we are still not at the end of the tunnel with regards to the economic downturn. However, it also suggests that as far as interest rates are concerned, we aren't likely to see a change in base rate any time soon.
So what does this mean for savers and borrowers?
As far as savers are concerned the effect of the historically-low base rate isn't as bad as it could be. This is because the leading savings deals continue to pay rates well in excess of 0.5%.
If you have money you can afford to lock away for a few years, ICICI Bank's three-year fixed rate HiSave account is paying 4.70%, while Yorkshire building society and Birmingham Midshires are both offering three-year bonds at 4.65%. If you'd prefer a shorter-term product, The AA's Internet two-year Fixed Rate Savings Account is paying 4.35% and Coventry Building Society's Poppy Bond (2) has a rate of 4.30%. And as far as one-year products are concerned, NS&I's Guaranteed Growth Bond is leading the way at 3.95%.
There are also some highly competitive rates if you want to retain access to your money, albeit the leading deals all include introductory bonuses you need to be aware of, as you'll need to move your money again once it ends.
Sainsbury's Online Saver and ING's Savings Account both pay 3.20%, while the AA's Internet Extra (Issue 1) and Birmingham Midshires Telephone Extra accounts both have rates of 3.15%.
However, when it comes to borrowers, mortgage availability is still relatively restricted.
Obviously, existing borrowers on variable rate deals continue to benefit from the fact base rate has remained unchanged at 0.5% since March. But, if you're looking for a new mortgage at the moment - whether it's because you're buying a house or remortgaging - the best deals are still only available to those with big deposits.
HSBC has the leading lifetime tracker at 2.74%, but it is only available to those with a deposit of 40% or more. Similarly, if you'd prefer a fixed deal, First Direct has the most competitive two-year fix at 3.69%. Again though, you'll need a 40% deposit to be eligible.
If you have less than that to put down the rates are higher, and certainly if you are needing to borrow up to 90% of the property's value, the choice of mortgages is much smaller.
The ongoing shortage of mortgages is one of the reasons why the Bank of England has extended the quantitative easing programme, although in recent weeks there have been a few more positive signs of things improving slightly for those with small deposits. Nationwide Building Society launched a new range of mortgages available up to 90% last week, although they are only available to those with a Nationwide FlexAccount. That said, the fact players are coming back into this market is welcome news as it should make rates more competitive for those with smaller deposits.
If you need to borrow 90%, HSBC has a lifetime tracker at 4.89%, with a £999 fee. Fixed rates are higher but one of Nationwide's new 90% deals is a two-year fix at 5.98%.
If you are looking for a mortgage and unsure whether to go for a fixed or variable rate, a independent mortgage broker will be able to help.
Please note: Any rates or deals mentioned in this article were available at the time of writing.
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