Ignore the headline: the true story of HSBC's 8pc

A fixed rate of 8 per cent interest on a regular savings account described by the bank offering it as the 'market's simplest'? Surely that's too good to be true?

Yes indeed, says savings-market monitor Moneyfacts of the new regular savings account launched today by HSBC. Savers do earn 8 per cent - but they need to meet strict criteria to qualify.

First, they must have a current account with HSBC (new or existing). Second, they must pay their monthly salary or pension into the current account (or, if self-employed, use it as their main current account). And third, they must top up the savings account every month with a standing order for a minimum of £25 and a maximum of £250.

In addition, they cannot withdraw money for a year without losing serious amounts of interest - and after the 12 months is up, the balance is transferred to HSBC's high-interest savings account, currently paying 2.75 per cent. With a maximum possible balance of £3,000, the most a regular saver can earn is £130 gross in the period, which, once taxed, leaves a basic-rate taxpayer with just £104 and a higher-rate taxpayer with £78.

The HSBC account follows hard on the heels of a Halifax regular savings deal with interest of 7 per cent and a Coventry account paying 7.25 per cent, both fixed for a year. These accounts also have their catches - not least the maximum amount that can be saved.

Rachel Thrussell, savings specialist at Moneyfacts, says: 'If you have £50,000 in an ING savings account which pays 4.89 per cent from £1 and is instant access, you are hardly going to bother opening a current account and savings account with HSBC just to get 8 per cent for a year on a maximum of £3,000.'

She adds: 'We do welcome the fact that HSBC is trying to encourage regular saving, but we think savers should not be swayed by fantastic headline rates - just look what happens after a year.'

Thrussell also warns savers to check what they might be giving up by switching their current accounts. She says: 'This is really more of an initiative to attract current-account customers, so it is important that customers are happy with what the current account offers. The HSBC current account pays only 0.1 per cent interest on current-account balances and the rate for an agreed overdraft is 14.8 per cent. Compare that with Alliance & Leicester's current-account interest of 4.89 per cent and 0 per cent for a one-year overdraft.'

An alternative for a saver wanting a good return is to opt for a tax-free cash Isa instead. The annual limit is also £3,000, and if a saver opts for the best - Portman's 5.5 per cent - this is the equivalent of 9.16 per cent gross for a top-rate taxpayer and 7.05 per cent gross for a basic-rate taxpayer. Even HSBC's Isa, which pays 4.35 per cent on £3,000, is the equivalent of 7.25 per cent for a top rate taxpayer and 5.58 for a basic rate taxpayer.

HSBC says the account is an incentive for existing customers, as well as for attracting new ones.

For further information phone 0800 520420 or go to www.hsbc.co.uk.

Get a little Xtra cashback


Halifax is also gunning for current-account customers with a new account that offers cashbacks to regular users of debit cards.

The account offers 1 per cent cash back on purchases up to £10,000, worth £100 a year. Spending above that level earns a cashback of 0.1 per cent.

The cashback is credited on the anniversary of the opening of an account. Customers receive interest at 0.5 per cent if they remain in credit, but must pay at least £1,000 a month into the account. Visit your local branch for further details.

Beware rogue mortgage lenders


Financial watchdog the Financial Services Authority has begun a crackdown on the sale of mortgages by unauthorised brokers.

Since 31 October last year, all mortgage brokers must be authorised by the FSA to do mortgage business. But a pilot scheme carried out in Glasgow and Edinburgh revealed that there are plenty of unauthorised brokers still selling loans to unwary borrowers.

The FSA urges consumers to report such firms, because borrowers who use them will not have the same access to financial redress and compensation if the deal goes wrong. The FSA advises would-be borrowers to check its database of authorised firms before they do business with any mortgage broker.

Log on to www.fsa.gov.uk/ firmcheckservice/ or telephone its helpline on 0845 606 1234.