Something to be cheerful about at last!

If you are saver, then you are likely to most benefit from the credit crunch, as many high street banks and building societies now offer you risk-free returns substantially higher than Bank of England base rate. So why are there good savings deals to be had?

Well, a number of money markets have frozen with fear that Northern Rock may not be the only bank to undergo liquidity problems; so this means the emphasis has switched to raising funds from retail depositors.

Would you return to Northern Rock?

Tighter money also means hundreds of thousands of homebuyers with fixed-rate mortgages due to expire this year may struggle to obtain high loan-to value advances after several lenders scrapped 100% mortgages and 125% mortgages disappeared altogether.

The borrowers' blues however, make for sweet music for savers; but those with cash to tuck away have to know where to make their money work hardest.

What can I get for my money? This table shows you a selection of bonds and deposits giving you more than 5.25% .

The biggest thing to mention is that even after basic rate tax is deducted, several risk-free accounts are yielding substantially more than the rate of inflation as measured by the Retail Price Index (RPI).

This is going up at 4.1% per annum, so you need at least a return of more than 5.12% to preserve the real value or purchasing power of your money.

As we have mentioned before, some of the highest returns are being offered by Northern Rock, which was nationalised last week. It is paying as much as 6.99% gross on as little as £1 to online savers, although that includes a temporary bonus of 0.5%. If you are willing to commit your money for a fixed term or make larger deposits, then you can do even better than that.

Some highlights are:

- West Bromwich Building Society offers 6.86% before tax on deposits of £1,000 or more in its six-month term fixed rate E Bond Issue 12. - West Bromwich Building Society also offers 6.55% on its Star Easy Access Savings Account on deposits of £1 or more. - Alliance & Leicester pays 6.25% tax free on as little as £1 in its ISA - Alliance and Leicester are paying 12% on their Premier Regular Saver account with a minimum deposit of £10 (although you do have to open a Premier Current Account with it)

Are my savings protected?

Yes they are.

Deposits with banks and building societies authorised to accept savings in the United Kingdom are protected by a statutory safety called the Financial Services Compensation Scheme.

This is an industry-funded scheme which, in the unlikely event that an authorised bank or building society goes bust, guarantees to repay 100% of individual depositors' losses up to a maximum payment of £35,000 per person.

The Treasury confirmed this week that taxpayers' money continues to guarantee all savers' deposits with Northern Rock, regardless of their value or when they are made.

The Treasury added:

"We have stated that we will give three months' notice before the Northern Rock guarantee is removed and there are no immediate plans to do so."

The Treasury dismissed speculation that nationalisation of Northern Rock might contravene European Union laws on unfair competition, adding: "There is no prohibition in the legislation against ownership - we already have National Savings & Investments and that is not an issue."

Are Northern Rock fighting fair?

Julia Harris of independent statisticians Moneyfacts believes that Northern Rock have an unfair advantage in the savings war:

"We keep asking how Northern Rock's savings rates can be so high but it is an issue of liquidity. The institutions, which were very dependent on money markets to raise funds, are now offering returns above base rate to try to bring in more from depositors. Northern Rock's offers to savers are well worth a look but its cheapest mortgage rate is not competitive at 6.29% fixed for two years, with a massive 2.5% arrangement fee, which compares with 5.08% at Cumberland Building Society with a £995 fee."

She adds:

"Northern Rock's standard variable rate is 7.69% compared to 7.25% at Halifax and 6.74% at Nationwide. Northern Rock has not reduced its mortgage rate since the Bank of England base rate reduction earlier this month and they only trimmed 0.15% off their rate after the cut of quarter of a point in the base rate in December."

Louise Cuming of Moneysupermarket. com adds:

"Northern Rock is charging 12.9% on unsecured lending on £7,500 over five years but borrowers could pay as little as 6.7% for the same loan from Moneyback Bank, the Alliance & Leicester online subsidiary."

Melanie Bien of mortgage brokers Savills Private Finance says:

"I cannot see Northern Rock drumming up much business with such uncompetitive mortgage rates and it was no surprise to see them withdraw their 125% mortgages this week, when the government and the Financial Services Authority had been telling borrowers to be careful and not over commit themselves."

Despite what you may think about Northern Rock now having an unfair advantage in the savings war, there are some great offers out there for switched on savers.

Check out the savings table to see what other savings deals offering more than 5.25%, you can get.

How good is your current account?

(Please note that articles on MoneyHospital do not constitute regulated financial advice. The articles are intended to provide general personal financial information. We urge you to consult an Independent Financial Adviser (IFA) before making any important decisions about your finances. All rates are correct at time of printing but are subject to change without notice.)

It is certainly tough if you are first time buyer isn't it?

Now that credit on international money markets has dried up, many banks are beating a retreat from mortgages.

This has meant the virtual disappearance of 100%-plus mortgages and the complete death of 125% mortgages.

To add to this, Nationwide is insisting on a deposit of at least 25% if borrowers want access to its best rates.

However, there is some good news!

Some first-time buyers will be able to take out a mortgage for half of the property's cost under a revamped government scheme.

Selected key public-sector workers will be able to choose whatever home they want to buy and pay for half of the property at normal interest rates and the remainder initially at just 1.75%.

Gordon's Brown's latest brainwave, replaces an existing scheme offering cut-price mortgages, which has been an embarrassing flop.

Open Market HomeBuy

The Open Market HomeBuy scheme, which went live in October 2006 has 3 products available:

1. a mortgage combined with "equity loans" from Halifax or Nationwide 2. a Yorkshire Building Society deal 3. a "government equity loan" where the state hands a buyer 17.5% of the purchase price in the form of an interest-free, fee-free loan

It is claimed to have helped, at most, just 2,000 first-time buyers get on the property ladder; that's less than 0.6% of the 358,000 first-time buyer transactions last year!

Open Market HomeBuy is a key part of Gordon's strategy to help people into home ownership, and is primarily for public-sector keyworkers which are defined as:

- Clinical NHS staff (with the exception of doctors and dentists) - Teachers and nursery nurses in schools and further education/sixth form colleges - Police officers, Community Support Officers and some civilian staff - Firefighters and other uniformed staff below principal level in Fire and Rescue Services - Prison Service staff in certain prisons - Probation Service staff - Social workers, nursery nurses, educational psychologists, and therapists (e.g. occupational therapists) employed by local authorities, CAFCASS, or the NHS - Ministry of Defence personnel; certain personnel qualify for new build products (New Build HomeBuy and Intermediate rent) - Local Authority Planners - Connexions Personal Advisors employed by a local authority or a Connexions Partnership - Qualified Environmental Health Officers/Practitioners who work in a local authority, Government agency, NHS or other public sector agencies - Highway Agency Traffic Officer staff in safety critical roles within the Traffic Officer Service

The programme is limited to keyworkers in the following areas:

- London - Berkshire, Buckinghamshire and Oxfordshire - Hampshire - Surrey - Hertfordshire - Kent, Sussex and Essex - Bedfordshire and Cambridgeshire - Norfolk and Suffolk

The new version of the Open Market HomeBuy scheme being launched on April 1 enables people who are eligible to take out a regular mortgage for as little as 50% of the property's value, with the remainder financed by top-up loans funded in part by the government. At the moment, participating buyers have to obtain a mortgage for a minimum of 67.5% of the property's value.

This change means that those of you looking to buy a house with a market value of £200,000 will be able to take out a mortgage for just £100,000. But a homebuyer taking out a 50% mortgage will have to pay interest on the top-up loans from day one. This "rent" would initially be set at a cheap 1.75% a year, rising to RPI inflation plus 1% (currently 5.1%).

The original Open Market HomeBuy came into being after ministers struck a deal with four mortgage lenders in which they, and the government, share some of the cost of buying a home. However, the scheme was criticised because these cut-price mortgages were available to only a few first-time buyers and were seen as uncompetitive.

All the deals will now be withdrawn on March 31 and replaced with two new offerings.

Some of those who have applied to benefit from Open Market HomeBuy have been put off by the fact that, even with the assistance on offer, they cannot borrow enough money to buy a suitable home.

Some have been turning to other shared ownership schemes.

There are a number of schemes designed to give struggling first-time buyers a leg-up on to the property ladder.

Some help buyers by offering them a cut-price mortgage or allowing them to buy a stake in a property that they may eventually be able to buy outright.

Such schemes include:

- Social HomeBuy

Allows housing association and local authority tenants who are not eligible for the "right to buy" or "right to acquire" schemes, or who cannot afford them, to buy a share in their rented home. However, not all councils and housing associations offer the scheme.

- New Build HomeBuy

The new name for shared ownership. Again, it's aimed at key workers, social housing tenants and others "in housing need". They purchase an initial share of 25%-75% of the property.

So, though it can be a bit harder if you are a first time buyer, there are still some good first time buyer mortgages out there.

To discuss your mortgage needs, why not talk to an adviser who, with access to all the latest mortgages and personal advice they often help and make moving you mortgage an easier process?

For more information on the Key Worker scheme visit the Communities and Local Government website.

Can you still get a good mortgage deal?

Your mortgage; to fix or not to fix?

Egg, (now possibly the UK's least favourite internet bank), has at least three millionaires among the customers it dumped last month, because it considered them a bad credit risk.

They were among 161,000 customers whose credit cards were cancelled last month when Egg purged its books of people it feared might fail to pay their bills.

Now, (and something that won't come as a shock to most of you who have talked to their "customare services") despite a meeting with the Labour MP and former consumer affairs minister Nigel Griffiths, Egg said there would be no change in their policy.

The MP said that among the dozens of letters he had received after speaking about the issue on several occasions at least three were from millionaires!

One correspondent said that his gross income last year was £1.1million and that he had worked for one of Britain's 50 largest companies for 26 years.

"My credit rating is excellent and I even happen to have shares worth £180,000 in a Citigroup account," one wealthy former Egg customer wrote. "I find it outrageous that this bank can make these statements and get away with it."

Egg, (which was set up by Prudential, the UK insurer) was bought by Citigroup, the US banking giant, last May and as a result, Egg reviewed its 2.3 million credit card accounts.

Many of you who were their customers complained about losing your cards, but the bank said you might become a high risk in the future.

An Egg spokesman commented on their position:

"The review was based upon a large number of variables and studied the level of risk inherent in groups of customers, rather than every individual." "So while some customers in that group may be up to date with their payments and have a good record with credit reference agencies and so on, the probability of them becoming a higher-risk customer in the future is higher than we wish to accept."

Oh really? And how might that be? Do they have some sort of crystal ball or specially trained dog?

Nope; the Egg spokesman said that indicators of credit risk included:

• the number of credit cards that you held
• whether you were using your credit card more frequently than you had in previous years
• whether you used the card to withdraw cash in sums that took them close to your borrowing limit

Egg denied that failing to make a profit from customers who always paid off their borrowings each month had been a factor in its decision to cancel the cards. It pointed out that it still made money on them, because it received a fee for every transaction.

Mr. Griffiths said about his meeting with the Egg heads:

"I expressed my strong concerns about the letters sent to customers, particularly since I felt that more information could have been provided. I have received an assurance that Egg will ensure that the credit record of these card-holders will not be affected, as long as they keep up their agreed repayments."

If you had a card that was cancelled, you will not be able to use them after the notice period. But you will not be forced to repay any outstanding money in one go unless you want to.

You will still have the option to pay the minimum monthly repayment, or pay larger instalments until the balance is cleared.

Claim back your credit card fees here

Mr. Griffiths said that the indicators used by Egg to model future risk would undoubtedly catch some responsible customers as well as those who posed a credit risk. "The whole industry has to look at this since it could unfairly penalise sensible borrowers," he said.

He has also asked the Office of Fair Trading (OFT) and the Financial Services Authority (FSA) to investigate Egg's actions. The OFT said that although credit risk was a matter for individual businesses, it would look at any complaint received and decide whether to investigate. The FSA said that it could not comment on individual companies or investigations.

Egg's action to get rid of so many credit card customers, is seen as part of a wider trend by banks to move their customers away from risky unsecured lending on credit cards and personal loans and towards lending secured on homes, which is safer for the bank.

Those of you aged between 34 and 49 are most likely to have your credit limits cut or your cards cancelled, while those of you aged 25 or less and who have very little credit history and no property, are more likely to have your limits extended.

Some banks expressed glee, albeit privately, at what they saw as a public relations blunder by Egg's new owner.

One banker said: "If they thought that this would go unremarked upon they clearly didn't understand British banking". Nope they clearly didn't!

This is definitely one case where a bank has been left with Egg on its face and shown to not be all it's cracked up to be!

Are you still seething after Egg's decision to dump you as a customer? What do you make of their decision to not change their mind?

Why not let us know in the comments below?

Are you wasting £137 a year on your credit card?

Claim back your credit card and mortgage exit fees

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