Don't give up on your savings!

Inflation is the enemy of savers. The interest rate you're earning on your account at least needs to match the rising cost of living, otherwise the purchasing power of your savings is being steadily eroded. That's why it's so important to move your money to find the best deal.

April saw the rate of inflation drop to 2.4% - down from 2.8% in March - which is positive news for hard-pressed British households. If you're a saver, it means there are more accounts out there that actually beat the cost of living.

Over the last year, we've seen the rates on savings accounts plummet. The main reason for this is the government's Funding for Lending scheme, which has provided banks with cheap money to lend to consumers. This means they no longer have compete with each other to attract deposits from savers.

So let's take a look at what 'inflation-busting' savings accounts are out there ...

Inflation-busting savings rates

The best savings rates are offered to those who are prepared to lock their cash away in a bond for a given period, or commit to regular saving over a defined term.

For instance, the Barclays Monthly Savings account offers a fixed interest rate of 3.25% (AER) for savers who can stick with the account for a 12-month period. You can save £20 to £250 a month. In any month that you make a withdrawal, the interest rate sags to 3.03%

The Leeds Building Society Regular Saver Issue 2 is another regular savings account with an inflation-beating rate of 3.05% (variable). As with the Barclays account, this can be opened with a £20 deposit and will need regular monthly deposits of between £20 and £500 thereafter. This account allows one penalty-free withdrawal to be made during the first 12 months.

The Furness Building Society Lifestyle Saver is also an option as this offers a rate of 3.00% AER (variable) and can be opened with a £1 deposit, after which monthly deposits of between £1 and £250 must be made.

If inflation is one spectre at the savings feast, tax is another. While there are other savings accounts on the market that are above the 2.4% level of inflation, you have to remember that the interest rates quoted are gross (without tax being deducted).

So, if you are a basic rate taxpayer and opt for an account that pays 3.00% AER, inflation will really start to bite as you'll lose 20% of your interest and you'll actually receive 2.4% net.

You can elude the tax man's clutches with an individual savings account (ISA), where you can save up to £5,760 each tax year and pay no tax whatsoever.  For example, Nationwide and Birmingham Midshires building societies are quoting 2.25% on ISA deals. You can check what the ISA market has to offer here.

 

Tax and savings

As mentioned, accounts are paid net of 20% tax. If you're a higher rate taxpayer you'll have to have to pay the extra tax due via your annual tax return.

So, to take the Barclays Monthly Savings Account as an example, while the gross AER is 3.25%, the net AER is 2.56% for basic rate taxpayers, which is still above inflation. But it drops to just 1.92% for higher rate (40%) tax payers and 1.76% for additional rate (45%) tax payers.

If you're a non-taxpayer (check our 2013/14 tax allowances guide) you can arrange to have your interest paid gross. You'll need to fill in form R85, which will be available from the institution concerned.

Alternative savings - Peer-to-peer

Peer-to-peer saving is growing in popularity due to the dearth of decent savings rates, but while it can considerably increase your return, there is also greater risk involved as your capital is not protected by the Financial Services Compensation Scheme (FSCS) that underpins traditional savings vehicles to the tune of £85,000.

All being well you could earn as much as 6.20% AER (variable) on a minimum investment of £20 if you chooseFunding Circle's product, while RateSetter offers fixed rates of 5.00% and 3.90% on its respective 5-Year Incomeand 3-Year Income products.

These products are potentially better alternatives for those in the higher tax bands who want to fight off inflation.

You can also get 3.00% on RateSetter's 1-Year Bond.

For a more detailed look at peer-to-peer savings, read Melanie Wright's article Peer-to-peer: The phenomenon taking savers by storm.

Alternative savings - Current accounts

Instead of opening a savings account, your best bet could be to switch current account as some are offering interest rates that compete with accounts high up in the savings charts.

For instance, the Santander 123 Current Account offers 3.00% AER on balances between £3,000 and £20,000,2.00% on balances between £2,000 and £2,999.99 and 1.00% on balances between £1,000 and £1,999.99.

This account also offers cashback on certain direct debits. So water bills, council tax bills and Santander mortgage payments earn 1.00%, gas and electricity bills earn 2.00%, while mobile phone, home phone, broadband and subscription TV packages earn 3.00%.

You will need to pay at least £500 per month into this account and there is a £2 monthly fee.

Alternatively, the Nationwide FlexDirect Current Account pays a fixed annual interest rate of 5.00% (AER) for 12 months on balances up to £2,500, provided that you pay at least £1,000 into the account each month.

Then there is the First Direct 1st Account that, once opened and provided you deposit at least £1,000 per month, gives you access to a regular savings account that offers an AER of 6%.

You'll have to make sure you take advantage of this savings account though as no interest is paid on your current account balance.

For more information on these and similar accounts, read Rachel Wait's article Maximise your savings... with a current account.

Beware the bonus period

Aside from the level of interest you earn, and any minimum or maximum deposits you can make, you should also look out for headline-grabbing savings accounts that are bloated with big temporary bonus.

Such accounts are fine during the bonus period, but once this ends the rate drops like a stone by the full amount of the bonus. The bank of building society will hope that you'll either not notice the removal of the bonus or simply not get round to moving your money. So try to take advantage of bonus periods while you can but be sure to move your money once the period expires - the banks are banking on you not bothering!

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

Focus on: Tesco offers 0% on card debt - for no fee

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Consumers looking to shift credit card debt to a card charging no interest are not short of choice at the moment. Providers have been tripping over themselves to offer the 'longest ever' 0% balance transfer deals - and, as a result, you can now get as long as 27 months.

But Tesco Bank has changed tack slightly with the launch of its latest credit card and, rather than offering the longest interest-free shelter, has become the only provider on the market not to charge a balance transfer fee to get there. We take a closer look.

What's the deal?

Tesco Bank's new Clubcard Credit Card with No Balance Transfer Fee offers 0% on balance transfers for 12 months. Compared to the market-leading Barclaycard Credit Card with Extended Balance Transfer, which offers 27 months at 0%, Tesco's offering looks a little poor. However it comes with the major advantage of being totally fee-free. In comparison, Barclaycard charges 2.98%.

This means that, while you'd have to shed out £89 to transfer a debt of £3,000 to Barclaycard, you could do it for free with Tesco.

The Tesco card also offers 0% interest on purchases for the first 12 months. And if you do spend on the card, you'll also be able to collect Clubcard points. You'll earn five Clubcard points for every £4 you spend in Tesco stores and petrol forecourts, plus one Clubcard point for every £4 you spend elsewhere.

Who's it good for?

Tesco's offering is ideal for anyone who has existing card debt which they are sure they can pay off within 12 months.

It's also a good option for anyone looking to spread the cost of one expensive purchase, or even a series of smaller ones, over a number of months, without having to pay interest. 

Any catches?

The main catch with the Tesco Clubcard Credit Card with No Balance Transfer Fee is that it is not market-leading in terms of its interest-free period. So you'll need to be sure you can pay off your balance in 12 months. If you don't, your remaining debt will be charged at a representative APR of 16.9% (variable).

And if are looking solely for a card which offers 0% on purchases, Tesco's 12-month offering on this card can be beaten by the Halifax Purchase credit card which offers 17 months' interest-free on purchases.

Finally, bear in mind that card deals like this one tend to be reserved for those with a top-notch credit score. To check yours, head over to our credit monitoring channel and apply for a copy of your credit report.

What's the verdict?

Providing you are able to clear your debt within the 12-month 0% window, the Tesco credit card is the cheapest way of helping you to tackle your debt head-on.

However, if you are likely to need longer than 12 months but don't want to fork out a hefty transfer fee, there are some compromises.
The Halifax Online All in One credit card, for example, charges a low fee of 1% (£30 on a debt of £3,000) and offers 15 months 0% on both balance transfers and purchases.

Alternatively, the Lloyds Platinum 21 Month Balance Transfer card has a slightly higher fee of 1.5% (£45 on a debt of £3,000) but offers an impressive 21 months' interest-free on balance transfers.

Top tip!

There is another way to avoid paying a transfer fee on your credit card debt, and that's by using a low APR credit card. Many of these cards don't charge a balance transfer fee and, although you will incur interest, the APR is far lower than the average of 17.32%. It's also charged for the life of the debt - this means there is no deadline by which you need to have paid off your credit card debt in full.

For example, the Sainsbury's Nectar Low Rate Credit Card offers Nectar card holders a representative APR of 7.8% (variable) on both balance transfers and purchases. Plus you will also collect Nectar points as you shop.

The Sainsbury's Cashback Low Rate Credit Card offers the same representative APR of 7.8% on balance transfers and purchases, but instead of earning Nectar points, you'll earn cashback.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

Maximise your savings... with a current account

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Anyone looking to build up their savings pot will no doubt feel exasperated right now. Savings rates have remained pitifully low for the past few years and no signs of improvement are on the horizon.

In contrast, competition in the current account market has stepped up a gear, with many banks and building societies now offering better rates of interest on their current accounts than on their savings accounts. As a result, it could pay to be a little more creative about where you stash your cash.

Get switching

Although many of us regularly switch savings accounts, the same can't always be said when it comes to current accounts.

In fact, research by First Direct found that 44% of UK adults have never switched their current account and a further 27% have only moved bank accounts once.

Other figures however, suggest this is starting to change. Nationwide Building Society recently revealed it has opened 365,000 new current accounts so far this year, with a record 123,000 customers switching their main banking relationship - that's a staggering 58% rise on the year before.

But should you need a little convincing as to why it's worth switching your current account, we've highlighted some great reasons below...

Switch to get a better rate of interest

According to First Direct's survey, more than a third (34%) of respondents claimed they would be more likely to switch current account if a better interest rate was available. If you fall into this category then there really is no excuse for not switching as a number of current accounts now offer extremely competitive interest rates and could make a great home for your savings. Just take a look at the following:

Nationwide FlexDirect Current Account: Pays an annual equivalent rate (AER) of 5.00% fixed for 12 months on balances up to £2,500. Basic rate taxpayers maintaining a balance of £2,500 for one year would receive total interest of £100.

Given that the best rate of interest you can earn with an easy access savings account right now is 2.00% with Nationwide's e-Savings Plus account, it's clear to see why the FlexDirect current account is worth snapping up. Don't forget that because it's a current account, you'll still have instant access to your money. In comparison, the e-Savings Plus account only permits five withdrawals per year and you'll need to be a Nationwide current account holder to qualify.

Even if you are happy to lock your money away for five years, the best-paying fixed rate bond, from Agribank, pays only 3.60% AER and you'll need a hefty deposit of £10,000. Bear in mind also that this provider is not covered by the Financial Services Compensation Scheme.

What to watch out for: To benefit from the FlexDirect Account's 5.00% rate, you will need to pay at least £1,000 into the account each month. Remember that you won't receive any interest on balances over £2,500 and after 12 months, the interest rate falls to 1.00%.

You can read more about the Nationwide FlexDirect current account here.

Santander 123 Current Account: Especially suitable for those who regularly keep larger sums of money in their current account as you'll get as much as 3.00% on balances up to £20,000. This is broken down as 1.00% on balances from £1,000, 2.00% on balances from £2,000, and 3.00% on balances between £3,000 and £20,000. Again, this is far better than most savings accounts pay and, unlike the Nationwide FlexDirect account, rates don't expire after a year.

But there's another benefit to this account as you also will receive cashback on some of your direct debits which leave the account. You will earn 1.00% cashback on your water bills, council tax bills and Santander mortgage payments, 2.00% on gas and electricity bills and 3.00% cashback on mobile phone, home phone, broadband and paid-for TV packages.

What to watch out for: You will need to pay £500 or more into your account each month and there is a monthly fee of £2.

Lloyds TSB Vantage Current Account: Interest rates are tiered depending on the size of your balance. Balances of between £1 and £999.99 earn an AER of 1.50%, balances of between £1,000 and £2,999.99 receive 2.00% and balances of between £3,000 and £5,000 receive an AER of 3.00%.

What to watch out for: You will need to pay £1,000 or more into your account each month and no interest is paid on balances over £5,000.

Halifax Reward Current Account: Rather than receiving interest, you will be paid £5 every month. And if you switch to the account before July 7, you will receive £100.

What to watch out for: To receive the £5 reward, you must pay £750 or more into the account each month and pay out at least two direct debits.

Switch to get access to better savings accounts

Of course, there are many more current accounts that don't pay interest, but some are still worth considering as they will instead give you exclusive access to more competitive savings accounts:

M&S Premium Current Account: Open this account and you'll qualify for the M&S Monthly Saver which pays a competitive AER of 6.00% fixed for 12 months. The account is ideal for those who save regularly as you'll need to pay in between £25 and £250 a month.

The M&S current account could also be right up your street if you're a keen M&S shopper as you will receive a £100 M&S gift card and 20% off your M&S shopping for a year. Plus you'll earn M&S loyalty points with your debit card in M&S, a birthday gift worth £10, and stacks of vouchers to spend in store.

What to watch out for: The M&S Premium Current Account costs £15 a month. If you'd prefer to have worldwide multi-trip travel insurance included, you'll need to pay £20 a month.

first direct 1st Account: Applying for this current account means you'll be able to save into the First Direct Regular Saver Account which also pays 6.00% AER for 12 months. You'll need to pay in £25 to £300 a month.

Not only that, but if you switch to the 1st Account you will receive £100 for your trouble. The account is also a good option if your biggest bugbear is poor customer service. First Direct is renowned for its excellent customer service and will even give you another £100 to leave the bank if you're not happy.

What to watch out for: You must pay £1,000 or more into the 1st Account each month or hold another First Direct product such as a mortgage or savings account (excluding the regular saver).

Switching is to get easier

If you're still not convinced about switching current accounts, perhaps news that from September the switching process will take no longer than seven days, will persuade you. You can read more about this in Mark Hooson's article.

But the existing switching process is still relatively straightforward and waiting until September could see you miss out on some of the best deals - so don't delay, get switching today!

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

Cut the cost of your mortgage

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The Bank of England base rate might have remained at 0.5% since March 2009, but the main rate of interest charged by mortgage lenders, known as the standard variable rate (SVR), is actually creeping up.

The average SVR today stands at 4.34%, up from 4.16% a year ago. And this means that if you're on your lender's SVR, your mortgage repayments could also be increasing.

What is the SVR?

The SVR is the rate your lender will move you on to once your current mortgage deal ends. So if you have a two-year fixed rate mortgage, once those two years are up, you'll be put on your lender's SVR.

SVRs vary from lender to lender but are typically a few percentage points above the base rate. However, they are not actually linked to the base rate, and - in the vast majority of cases - your lender can change its SVR whenever it chooses to. This means that even if base rate remains unchanged, your lender's SVR, and therefore your mortgage repayments, can still go up.

But the good news is that if you are on your lender's SVR, you can move off it at any time without paying a penalty. And with mortgage rates at record lows, now is the perfect time to remortgage to a better deal.

Mortgage availability up, mortgage rates down

There really couldn't be a better time to be a borrower. The Funding for Lending Scheme (FLS), which offers cheap funding to lenders on the proviso they pass this on to customers in the form of cheap mortgages and loans, was announced in April 2012, and since then, mortgage availability has improved, while mortgage rates have continued to fall.

In fact, research by MoneySupermarket shows the number of mortgages available to borrowers has increased by 34% since April 2012, to 3,288 - the highest level seen since August 2011.

On top of this, rates on two-year fixed mortgages have fallen from 4.21% in April 2012 to 3.28% today, while rates on five-year fixed mortgages have dropped from 4.67% to 3.84%.

This means remortgaging from your lender's SVR could certainly pay off. So let's take a look at some of the best offers.

Fixed rate mortgages

Those with larger deposits continue to benefit from the very best mortgage rates. For example, if you have a deposit of 40%, Chelsea Building Society has just launched a two-year fixed rate mortgage at 1.69%, reverting to 5.79% in July 2015. The deal has a £1,595 fee and the overall cost for comparison is 5.2%. Early repayment charges apply.

Tesco Bank has also just launched a two-year fixed rate mortgage at 1.74%, reverting to 4.24% after two years. This deal has a £1,495 fee and the overall cost for comparison is 3.9% APR. Again, early repayment charges apply.

If you'd prefer to fix your mortgage repayments for five years, Tesco Bank also offers a five-year fix at 2.49%, reverting to 4.34% after five years. The deal again has a fee of £1,495 and the overall cost for comparison is 3.7% APR.

Deals with a lower deposit

However, if you'd prefer a deal with no fee, HSBC offers a five-year fix at 2.99%, reverting to 3.94% after five years. The overall cost for comparison is 3.6% APR. Early repayment charges apply to both of these deals.

But if you can't afford a deposit of 40%, don't worry as there are plenty of competitive rates available for those with smaller deposits. If you have a deposit of 20%, for example, you can enjoy a rate of 2.74% with the Newcastle Building Society two-year fixed rate deal, reverting to 5.99% after two years. The fees come to £995 and the overall cost for comparison is 5.6% APR. Early repayment charges apply.

Tracker mortgages

Those preferring a tracker mortgage will also find there are a number of competitive deals to choose from - particularly for lifetime trackers. Just remember, your mortgage repayments can change during the term of the deal.

If you have a 40% deposit, both Cheltenham & Gloucester and Lloyds TSB offer a two-year tracker at 1.89%. The deals track 1.39% above base rate for two years, before reverting to a rate of 3.99%. Both mortgages come with a £1,995 fee and the overall cost for comparison is 3.9% APR. And there is not even an early repayment charge.

If you would prefer a lifetime tracker, take a look at HSBC's offering at 2.28% with a fee of £1,999. The overall cost for comparison is 2.5% APR and there are no early repayment charges.

Those with a 20% deposit can take advantage of Metro Bank's two-year tracker at 2.89%, reverting to 4% after two years. It has a fee of £999 and the overall cost for comparison is 3.9% APR. Early repayment charges apply.

Or, if you'd prefer a lifetime tracker, Coventry Building Society offers one at 2.99% with a fee of £999. The overall cost for comparison is 3.1% APR and there are no early repayment charges.

YOUR HOME MAY BE REPOSSESSED IF YOU DON'T KEEP UP REPAYMENTS ON YOUR MORTGAGE.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct

What should you do if you have an interest-only mortgage?

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Nearly half (48%) of all homeowners with interest-only mortgages will be unable to clear the debt when the loan matures, according to research from new city regulator, the Financial Conduct Authority (FCA).

It found that, of the 2.6 million interest-only mortgages that will mature between now and 2041, around 1.3 million homeowners will be unable to pay off the capital. The average shortfall is estimated to be around £71,000.

What is an interest-only mortgage?

As it says on the tin, an interest-only mortgage just requires you to pay the interest charged every month. The idea is that funds should be saved or invested separately into an investment vehicle such as an ISA or an endowment to cover the capital debt, which much be cleared at the end of the term.

But these investments have largely underperformed, leaving a shortfall at the end of the loan term in many cases. And around 10% of interest-only homeowners are not saving into an investment vehicle at all, according to the FCA's new report.

In the past 12 months, this has prompted a clampdown from mortgage lenders when it comes to granting new interest-only loans. Lloyds TSB and Santander tweaked criteria making the deals more difficult to get, while Royal Bank of Scotland and NatWest, the Co-operative Bank and Nationwide and Coventry building societies stopped offering them altogether.

This means the number of interest-only mortgages available has dropped dramatically. When our data team at MoneySupermarket ran some figures, they found there are currently 141 interest-only deals on offer from 17 lenders. But as recently as November last year, there were 211 interest-only deals offered by 27 lenders.

But what should you do if you already have an interest-only deal and are worried about clearing the debt when it matures? Here are your options.

Switch to a repayment mortgage

The ideal solution is to switch to a repayment mortgage with your current lender, although you would need to be able to afford the increase monthly payments. For example, the difference in cost between a £200,000 repayment and interest-only mortgage, priced at 5% over 25 years, is more than £300 a month.

But Clare Francis, editor-in-chief at MoneySupermarket, said: "Even if you can't afford the higher monthly payments on a repayment basis, try and overpay whenever possible - even if you are tied into a deal, many lenders will allow you to overpay by 10% each year penalty-free."

She adds: "Review all of your other outgoings and look for ways to free up some cash which can either be used to make an overpayment on the mortgage or invested somewhere that becomes your 'mortgage fund'. This can be money to go towards paying off your debt off at the end of the term."

Remortgage to a cheaper deal

 If you haven't addressed the issue of your mortgage for years, you may find you are sitting on an uncompetitive rate. The average Standard Variable Rate (SVR), which is the rate you will revert to at the end of a fixed or tracker deal, for example, currently sits at 4.24% according to our figures, though some lenders charge a lot more.

If you have owned your home for a while and have built up significant equity you may be able to switch lenders and get a better rate. It's unlikely you will be able to switch to another interest-only deal but, with the lower monthly repayments required on a lower rate, it could even be possible to switch to a repayment deal and keep your monthly mortgage costs the same.

For example, if you can get your hands on a 40% deposit, you can fix in your rate at just 2.49% for five years with HSBC, which you can read more about in Rachel Wait's article.

Have a look at what other deals are available on our mortgage comparison channel too. Bear in mind a new lender will assess your affordability from scratch - and there will typically be an arrangement fee to stump up too, which could be £1,000 or, with the very cheapest rates, even more.

Sell up, bank the cash and start again

Another option, while slightly more drastic, is to sell your property and either downsize so that you have a smaller mortgage, or bank the equity and rent for a while. "That way you can establish a new home while you're in control as opposed to being forced to sell in a hurry because your mortgage term is about to end," says Clare Francis.

The good news is for anyone looking to sell, is the housing market is picking up. According to property website Zoopla, confidence in the housing market is at its highest for three years, with 74% of homeowners expecting prices to rise by September.

Don't bury your head in the sand

If you are on an interest-only deal which you have concerns about, time is of the essence, so you should take action now, says Clare Francis: "Lenders will be contacting all customers whose mortgage terms end before 2020 to work with them on how their loans will be repaid - but there is also an onus on individuals to proactively address the situation."

You can start by contacting your own lender to discuss your circumstances, but it's is also worth seeking advice from an independent mortgage advisor who could brief you on your wider options. Our broker partner, London & Country, can be contacted on 0844 209 8725. You won't be charged anything for advice - whether you proceed or not.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

Focus on: Loan rates hit new all-time low of 4.9%

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If you are looking for a mid-sized personal loan, you couldn't have chosen a better time as peer-to-peer lender Zopa has unveiled the cheapest personal loan rate ever! Here, we take a closer look at what you need to know about the deal.

What's the deal?

Zopa is a peer-to-peer lender, not a bank or building society. This means that the money will be lent to you by range of consumers using the Zopa website to get better returns than they would from a standard savings account. You can read more about this in Melanie Wright's article, Peer-to-peer: the phenomenon taking savers by storm. From your point of view however, it's just the same as borrowing through a traditional lender.

The representative APR (annual percentage rate) of 4.9% applies to borrowing of between £7,500 and £10,000, and to loans repaid between one and three years. Obviously, the shorter timeframe you choose, the less interest you will pay.

Who is it good for?

Anyone with a good credit score looking for a loan of between these amounts, and who is unfazed by making applications entirely online.

Any catches?

The first major hurdle is that, to benefit from this sub-5% rate, you'll need to act fast - it's only available untilWednesday, 22 May.

If you do find time to apply between now and then, bear in mind that, as with any other bank or building society, the rate you see advertised is only representative which, legally, means it only needs to be offered to 51% of successful applicants. So, depending on your credit score, you may not be offered the 4.9% rate you see - if you are offered a loan at all.

Bear in mind also that, as they need to protect the people who lend to you, peer-to-peer websites like Zopa can be quite strict when assessing borrowing applications.

Finally, if you were looking to keep your monthly loan repayments down, the maximum repayment term on this loan is three years but you can get up to five years elsewhere.

What's the verdict?

At sub-5%, the rate on the Zopa loan is not only the cheapest on the market, but the cheapest on record, which has to be good news. However, its lending competitors are trailing very close behind and, in some circumstances, could actually be the better option.

Derbyshire Building Society, for example, is offering a personal loan rate of 5% on the same minimum loan size of £7,500. But this rate applies to borrowing all the way up to £15,000 which is better for anyone looking to borrow more than £10,000. What's more, the Derbyshire allows you to spread the repayments up to five years - longer than the three offered by Zopa.

Sainsbury's Bank offers a similar deal at 5% on loans of £7,500 and £15,000 but on a maximum term of three years - and you will also need a Nectar card to apply.

Top tip!

 As we have mentioned, in order to grab the best loan rates, you will need an excellent credit score - but if you make too many applications and are rejected, this score can be damaged further entering you into a downward spiral.

You can avoid this however by employing our loans Smart Search facility which will give you an idea of how likely it is you'll be accepted for a loan before you actually apply.

Please note: Any rates or deals mentioned in this article were available at the time of writing. Click on a highlighted product and apply direct.

Cash in on our May Money Sale!

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When was the last time you looked at your finances?  Even if it was relatively recently, offerings from the nation's banks and building societies have improved almost beyond recognition - especially when it comes to credit cards, loans and current accounts.

That's why we've launched the MoneySupermarket May Money Sale which rounds up the best deals available in these three camps.

We've even thrown in some table-topping offers which are only available through us. In other words, if you are looking for extra special value from a credit card, loan or current account, you are in the right place at the right time. Here's what's on offer.

The best credit cards for rewards and purchases

If you are looking to make a large purchase, spread the cost and pay no interest, the Halifax Purchase Card is your best bet offering 0% on purchases for a market-leading 17 months. The deal is available either through MoneySupermarket or direct from the Halifax website. Be sure to clear your balance before the interest-free window ends though as the card then comes with a representative annual percentage rate (APR) of 16.9% (variable).

But if you clear the balance on your credit card every month and are looking to be rewarded for your spending instead, you'll need to look at the American Express Platinum Cashback Purchase Credit Card instead. 

This card, which is totally exclusive to MoneySupermarket, offers 13 months interest-free on purchases and you'll also earn an ongoing cashback rate of 1.25% on virtually everything you spend. On top of that, you'll earn double cashback for one month a year providing you've spent more than £10,001 in the previous 12 months.

Keen travellers might prefer the American Express British Airways card however, which allows you to collect Avios (formerly Air Miles) as you spend. These can then be redeemed on flights across the world.

Usually, you would earn one Avios for every £1 you spend as well as 3,000 Avios if you spend a total of £500 in the first three months. However, apply for the card through MoneySupermarket and you will receive a better deal of 9,000 Avios (if you spend £1,000 in the first three months) which is enough to get you a free return flight to Europe. You won't be compromised on your Avios earning thereafter either as you'll still earn the same rate of one Avios for virtually every £1 spent.

This deal is not available with through any other comparison site, although you can apply direct through American Express website. But remember to only apply for this card if you are able to clear your balance in full every month. Otherwise you'll be hit with an APR of 15.9% (variable) which could wipe out the benefit of the rewards.

A more general rewards option to consider is the Barclaycard Freedom Rewards credit card - a deal which has also undergone improvement. Now you can collect £50 of reward points when you spend £500 or more in the first three months of taking the card as opposed to the previous £30. You can collect points wherever you shop which can then be redeemed in a number of high street stores, restaurants and UK attractions.

Balance transfer credit cards

If you have existing credit card debt racking up interest in the eye-watering realms of 18% APR, it makes obvious sense to move it to a 0% balance transfer card. The current market leader in these stakes is the Barclaycard Platinum Credit Card with Extended Balance Transfer which offers a 26-month interest reprieve on your transferred debt. The deal comes with a transfer fee of 3.5% but if you apply through MoneySupermarket (and transfer £2,000 or more), you'll get £10 off.

Credit builder credit cards

It might be that you are struggling to get credit at all because your credit rating isn't top notch or you've never had borrowing before. In this case, the Aqua Advance Credit Card could be right up your street.

It charges an APR of 34.9% (variable) on purchases and, providing you make the minimum payments on time, the rate reduces by 5% every year for three years. (However, better still, if you pay your balance in full every month you won't pay any interest at all.) The card is exclusive to MoneySupermarket and you'll also receive a £20 Amazon gift voucher when you open the account.

Personal loans

If you're in the market for a personal loan, you couldn't have chosen a better time. Loan rates are sitting at historically low levels with both Sainsbury's Bank and Derbyshire Building Society charging a leading low of 5% on borrowing of between £7,500 and £15,000.

The Derbyshire comes out on top though, as you can spread the repayments over five years, compared to a maximum of three years offered by Sainsbury's. The Sainsbury's deal also requires you to have a Nectar card before you apply.

Current accounts

If you've been with your existing bank for as long as you can remember, it could be time to switch your current account - particularly if you always stay in the black.

Providing you stay in credit, the Halifax Reward Current Account will reward you with £5 every month you pay in £750 and pay out two direct debits. You'll also receive £100 for switching to the account.

Alternatively, the Nationwide FlexDirect current account offers an annual equivalent rate (AER) of 5.00% on balances up to £2,500 for 12 months. After this, the rate falls to 1.00%. You will need to pay in at least £1,000 a month to qualify and you can read more about the account here.

Another option is the Santander 123 current account which pays 3.00% AER on balances between £3,000 and up to £20,000, 2.00% on balances between £2,000 and £2,999.99 and 1.00% on balances between £1,000 and £1,999.99.

You will also earn cashback of between 1.00% and 3.00% on your household bills providing they are paid by direct debit from your account. But watch out for the £2 monthly fee.

Prepaid cards

If you're jetting off on holiday in the next few weeks, you might want to think about taking a prepaid card with you. Prepaid cards require you to load them up with cash in advance and often allow you to sidestep the expensive fees that come with debit or credit cards.

Previously, the My Travel Cash card (Euro, Dollar, Multi) offered an extra £5 if you loaded up the card with £600 (or the equivalent currency) or more, exclusively through MoneySupermarket. Now this offer has improved, and if you load up £750 or more, you'll receive an extra £10. Better still, the card is free, you won't be charged ATM fees anywhere in the world and you'll receive 1% cashback on all purchases. The deal is still exclusive to MoneySupermarket.

Alternatively, the FairFX Euro Card will also throw in £10 cashback if you load up £500 or more onto the card in Euros. The card normally costs £9.95 to apply for, but it's free if you load £60 or more onto the card in Euros. Again, this deal is also exclusive to MoneySupermarket.

Focus on: Lowest EVER five-year fixed rate mortgage

moneysupermarket.com

News that the Funding for Lending Scheme (FLS) is being extended by a year to January 2015 means borrowers are likely to continue enjoying low interest rates on loans and mortgages for a while yet.

The FLS, which offers cheap funding to lenders on the proviso this is passed on to consumers and businesses, has encouraged mortgage rates to tumble, with lenders jostling to offer the lowest-cost deals on record.

And this time it's HSBC's turn to up the stakes, following the launch of a market-leading five-year fixed rate deal at an all-time low 2.49%.

So is this the right mortgage for you?

What's the deal?

HSBC has launched a five-year fixed rate mortgage priced at 2.49%, reverting to 3.94% after five years. The deal is the cheapest of its kind in history.

Available on borrowing of up to £250,000, the HSBC mortgage requires a deposit of 40% and you will need to stump up a fee of £1,999 on top. The overall cost for comparison is 3.6% APR and early repayment charges apply.You can see the new deal and how it compares to others from the lender here.

The latest offering from HSBC now beats Yorkshire Building Society's five-year fix at 2.59% which you can see here. This deal reverts to 4.99% after the deal period and comes with a slightly lower fee of £1,345. The overall cost for comparison is 4.1% APR. Again, early repayment charges apply.

Who's it good for?

The HSBC five-year fixed rate mortgage is ideal for those who have significant equity in their home, (or can stump up a large deposit) and who favour the security of cheap payments, rather than flexibility, over the long term.

Any catches?

The interest rate from HSBC might be the lowest on record over the five-year timeframe but it only applies to borrowing of up to £250,000, which caps this benefit. The hefty 40% deposit could also put the deal out of reach of many and the £1,999 fee is on the pricey side.

In addition, if you're thinking of applying for the HSBC mortgage you need to ensure you are happy to commit to a five-year deal.

Should you need to get out of the mortgage early you will have to pay an early repayment charge - this is quite complex so check the terms and conditions carefully to ensure you know how much you would have to pay.

You should also bear in mind that HSBC only offers its mortgages direct and not through mortgage brokers.

What's the verdict?

HSBC's five-year fixed rate mortgage at 2.49% is a great deal so long as you know what you are getting into. However, if you would prefer not to fix for as long as five years, there are plenty of shorter-term fixed rate deals available. For example, you could opt for Chelsea Building Society's two-year fix at 1.74%, reverting to 5.79% after two years (overall cost for comparison is 5.2% APR). It requires a 40% deposit and comes with a £1,545 arrangement fee and a £130 processing fee.

Alternatively, the Yorkshire Building Society's two-year deal is priced at 1.79%, reverting to 4.99% after two years (overall cost for comparison is 4.5% APR). Again, you will need a deposit of 40% but the deal has a £1,345 arrangement fee plus a £130 processing fee.

But even if you don't have a deposit as high as 40%, you can still take advantage of some competitive deals. For example, those with a deposit of 10% can enjoy a rate of 3.69% with Chelsea Building Society's two-year fix, reverting to 5.79% after two years (overall cost for comparison is 5.5% APR). It has a £1,545 arrangement fee and a £130 processing fee.

Early repayment charges apply to all of the above deals.

Take a look at our mortgage channel for further options.

Top tip!

While mortgage rates continue to fall, mortgage fees are going up and up, making it more important than ever to factor these into the equation when comparing deals. In some cases it can even work out cheaper to opt for a higher mortgage rate if it comes with a lower fee.

For example, if you had a mortgage of £175,000 and applied for the HSBC five-year fix at 2.49%, you would pay £49,051 in total, including the fee, over the five-year period.

Yet if you applied for the Norwich & Peterborough Building Society five-year fix at 2.74%, which has a much smaller fee of £295, you'd pay £48,679 in total over five years. So the Norwich & Peterborough deal works out to be cheaper.

In fact, it remains the cheapest option if you are borrowing anything less than £223,850 - at this level of borrowing, both the Norwich & Peterborough deal and the HSBC mortgage will cost you the same over the five years (£62,185).

For those borrowing anything over £223,850, the HSBC mortgage is cheaper - but remember, the maximum you can borrow is £250,000.

If you need more help, contact our mortgage partner, London & Country, for free, independent advice on 0844 209 8725.

YOUR HOME MAY BE REPOSSESSED IF YOU DON'T KEEP UP REPAYMENTS ON YOUR MORTGAGE.