Short-Term Gain v Long-Term Value

Is the best rate always the best bet?

Best buy tables have become very popular in recent years and I can understand why. 

The tables offer a quick fix to your financial needs, providing a snapshot of the most competitive rates out there. Rather than doing research into a complicated area of financial services and scouring the market for the right deal, just turn to the best buy tables and, hey presto, somebody has done the hard work for you.

But we all know it's not as simple as that.

Firstly, the best deals are constantly changing, so in order to ensure you are benefitting from the highest savings or the cheapest credit card rate, you have to check the tables regularly. And, quite frankly, who has the time or inclination to continually ensure they have not been pipped on pet insurance or beaten on buildings cover?

Of course, it makes perfect sense to consult best buy tables if you have a financial product coming up for renewal -- your insurances are probably annual policies and once a year it is well worth doing some research to make sure you get the best deal.

Just don't limit your research to the ‘best buys'. Financial services providers are experts in robbing Peter to pay Paul, so often a really low mortgage rate might come with an enormous fee, or tie you in for the next 10 years. Equally, a ‘too-good-to-be-true' insurance policy may not offer all the cover you need.

Looking beyond the headline rate, at fees and added restrictions or conditions, is something that should be a matter of course for anyone with financial nous, but what about approaching your finances in a different way altogether?

Playing a long game

You could save yourself the bother of continually checking rates by saying goodbye to short-term gratification with your financial products and hello to long-term good value.

Instead of moving your money into what is currently the best rate, look for products that offer longer or even ‘lifetime' guarantees.

Consider getting a savings account that consistently offers competitive rates rather than flitting from one to the other. Some deals offer guarantees that the rate will be maintained at a competitive level for a set period, such as Icelandic savings provider Icesave's savings account.

Not only is it in the top five of many best buy tables, offering a rate of 6.05%, it also provides a guarantee that the AER will beat Base Rate by at least 0.35% until 1 May 2011 and at least match Base Rate until 1 May 2013.

The same principle can be applied to mortgages. Many of the lowest rates are short-term teasers after which you revert to a higher rate. However, with HSBC for example you can currently have your cake and eat it.

The lender is riding high in the best buy tables with a 5.63% remortgage tracker which is not only one of the best deals on the market, it is also brilliant long-term value -- the mortgage is pegged at Base Rate plus 0.63% for the life of the loan. You get a good deal now and a good deal for your whole mortgage term.

And consider that by staying on one deal you are saving remortgage costs of around £1,000 every couple of years - a hefty sum over a 25-year mortgage term. Plus, with this particular HSBC deal, there are no Early Repayment Charges so you are free to switch at any time, if you really want to.

With credit cards there are plenty of 0% short-term deals around, but look at the rate you will switch to after the initial period - many are around 15%. Capital One however, offers a 0% introductory rate and the lowest reversionary rate (9.9%) after a year on the teaser rate.

For people who don't have the time or desire to be rate tarts -- constantly checking the best buy tables and moving their finances between providers to chase rates -- products like these are good alternatives.

And over the long term, they may work out just as competitive as the headline-grabbing deals, especially when you take into account trust, value and service -- factors that cannot be measured by best buy tables. 

Of course, it's always worth giving your finances an overhaul to make sure you are not paying over the odds somewhere -- but this could be done on an annual basis. And if you put in the research at the start, you might just find that you are better off sticking with what you've got.

> Six Top Long-Term Mortgage Deals
> Speak to a broker at lovemoney.com Mortgage Service who could help you find a good long-term mortgage deal.