Slim pickings for savers as margins get fatter

Most homeowners with variable-rate mortgages will pay more for their loans this month as lenders respond to the latest rise in base rate.

But savers are not seeing better returns. The fattening of margins is clear from the latest comparison of loan and savings rates from financial database Moneyfacts. The average mortgage rate for existing borrowers is now 7.08 per cent, or 7.1 for new borrowers - rises of 0.18 per cent and 0.2 per cent respectively. But the average rate on an instant access savings account is still 1.43 per cent and, on a 90-day notice account, 3.39 per cent, up 0.07 per cent and 0.05 per cent.

Five years ago, when base rate was only 0.25 per cent higher than today, the aver age instant access account paid 2.65 per cent more.

A failure to pass on interest rate cuts to borrowers earlier this year was one factor that prompted the Government to crack down on mortgage lenders. It is planning a benchmark, or Cat mark (Charges-Access-Terms) to guide borrowers to fair deals. It should now look at extending Cat-marking to savings, and beefing up the existing scheme for Isa accounts.

Savers fed up with poor deals may look to accounts that promise to track the Bank of England base rate. However, it is essential to check the exact terms. Leeds & Holbeck building society, for example, is offering a start-up rate of 7 per cent on its new 'instant access' tracker account. But you can only get at your money before 1 June 2000 by closing the account and withdrawing all your money. Penalty-free access comes only after that date.

The Banking Code says such terms must be spelt out clearly in literature, and Leeds insists it will do so. Let's hope that happens.