Make The Most Of This Strange Summer

Whether it's a credit card, a mortgage or a savings account you want, you better act quick.

This article was first sent to Fools as part of our Summer Lolly email campaign.

This summer the Bank of England base rate is 5%: the same level as it was back in the winter of 2006/7. Surprisingly, rates on many financial products are very different though. We're having a strange financial summer.

The Bank of England base rate is the interest rate at which banks can borrow from the Bank of England. This in turn affects the interest rates that banks offer us, whether we are borrowing money from them or earning interest on our savings.

However, new figures from Defaqto, a data collection and research company, show that despite the base rate being the same as 1 ½ years ago, we're actually being offered substantially different deals.

Credit cards

Defaqto examined the two main types of credit-card deal: the 0% balance transfer and 0% on purchases deals.

It has found that the average credit-card deal has increased in length for balance transfers, but in all other ways the average customer is worse off:

The average-credit card

Offer criteria	Dec 2006	June 2008	Who benefits?
Length of 0% introductory balance transfer offer	9 months	10 months	The consumer
Balance transfer fee	2%	2.7%	The provider
Length of 0% introductory purchase offer	5 months	4 months	The provider
Standard purchase rate per month	14.8%	15.5%	The provider
Standard cash advance rate per month	19.4%	22.6%	The provider

No one should choose to leave their debts on a credit card that is charging the standard purchase rate, nor should you withdraw cash, or in any other way incur the hideously big cash advance costs! So hopefully the last two columns don't matter to you.

Looking back at The Foolish Records, the best 0% balance-transfer card in December 2006 was Capital One's Platinum Card. It offered a 12-month deal with a 2% fee. Now the best card is the Virgin Money Card, with a 15-month deal and 3% fee.

The best purchases card back then was the Halifax One Card, offering 12-months interest free. Now it's the Capital One Platinum Card, again with 12 months.

So anyone chasing the best credit-card deals this summer is no worse off than they were 18 months ago.

Mortgages

It's a similar story with mortgages. Customers are faring much worse, despite the base rate being the same.

The figures are similar whether it's for fixed mortgages or tracker mortgages, so I'll just focus on fixed:

The average fixed-rate mortgage

Offer criteria	Dec 2006	June 2008
2yr fixed-rate	5.4%	6.7%
2yr year fixed-rate arrangement fee	£625	£825
2yr fixed-rate max loan-to-value	90%	83%
5yr fixed-rate	5.6%	6.7%
5yr fixed-rate arrangement fee	£425	£750
5yr fixed-rate max loan-to-value	93%	84%

In every way mortgages are more expensive, be it the fees or the interest paid. The bank takes all!

Unlike credit cards, it's impossible to say what the best deal is, because the right mortgage depends entirely on your circumstances. However, First Direct and HSBC (part of the same banking group) are currently offering some mortgages (direct only) that should be interesting to many.

One of these is First Direct's fixed-rate offset mortgage, which is 5.5% for two years, matching the average deal from December 2006. However, the fee is £1,000. You should always compare the total cost including all fees, not just the interest rate.

You can compare the total cost easily and find the best mortgage for your circumstances by comparing the whole market through The Motley Fool.

Savings accounts

At last, we come to the good news. Banks are charging more for debts, but they're paying more to savers, as this final table of data from Defaqto shows. You'll notice that all types of account are now paying more to the customer:

The average savings account

Product	Dec 2006	June 2008
Easy access accounts: AER for £5,000	3.5%	3.8%
Regular-saver accounts: AER for £100pm	5.5%	5.6%

The best accounts pay a great deal more than the average. Back in winter 06/06, Icesave and ICICI offered the best rate for catch-free, easy-access accounts with decent guarantees: 5.45%: almost 2% more than the average.

Now, the best savings account of the same kind is Bradford & Bingley, with 6.51%, which is approaching 3% more. (Birmingham Midshires offers 6.2% but there is no guarantee that it will stay at or above the base rate, which is one of the criteria I always use to assess these accounts.)

Regular savings accounts can pay huge interest rates at present if you shop around. 18 months ago you could get 12.5% from Barclays, although I've found an old article of ours that explains the strings attached to it. Now you can get 12% with Alliance & Leicester (with another hefty catch) and 10% with Halifax or Bank of Scotland (although with just a small catch). You can read about both here.

So, here is yet more evidence that, this summer, borrowers are worse off but savers are better off. Now, if only one or two more of us could find some spare cash to save!