Money Insider: Don't discount banks in the January sales

While we don't know what's in store for us in 2010 in terms of interest rates, house prices and inflation, one dead cert was that financial institutions would queue up to offer us a piece of the new year sales action.

As with the January discounts you find in shops, you should treat those on offer from the banks in the same manner. You need to ask yourself a few questions before making a hasty purchase that you may later regret. For example, do you really need it; is it the right fit for you; and, of course, could you find a cheaper or more suitable option?

HSBC this week launched its sixth annual "sale" offering improved rates or terms across a wide range of banking products.

The 2.29 per cent discounted two-year mortgage looks a real winner and worth considering, but most of the other sale items are not quite such bargains as they appear.

The three- and five-year fixed-rate savings accounts have had the rate enhanced by 0.75 per cent and are both offering 4.25 per cent, but only if you open a Plus or Premier current account, both of which come with monthly fees. The other issue with these savings rates is that even though they've been increased, you can still get a better return with three-year fixed rates of 4.7 per cent from ICICI Bank and 4.5 per cent from Halifax. Similarly, fixing your savings for five years can see you earn as much as 5.25 per cent from State Bank of India or 5.15 per cent from Aldermore, both of which have the full Financial Services Compensation Scheme £50,000 guarantee.

The problem with sales is that people often make snap purchases as the window of opportunity seems quite short. However, when it comes to making financial decisions, it pays to take your time and not be swayed purely by the price on the ticket.

As with any sale, while some on offer are good, others that look appealing at first glance may end up being a disappointment.

Mortgages

The first week of 2010 has seen further positive news on the house-price front plus a handful of cracking new mortgage deals on offer from the building societies.

The Halifax house-price index reported its sixth consecutive monthly increase, with the average property now said to be worth a shade over £169,000, an improvement of 9.4 per cent on the 2009 low point we saw last April.

With the economic uncertainty and future supply of houses for sale making price predictions difficult, providers are certainly doing their bit to stimulate the market in an effort to keep the momentum going.

The two-year fixed-rate market has been the focus of lender activity this week with Cumberland Building Society trimming an already market-leading rate to 3.49 per cent with a fee of £995 for loans to 60 per cent loan-to-value.

Mansfield Building Society also revealed a strong appetite for new business with a two-year fix at 3.59 per cent and £999 fee available up to a more generous 75 per cent loan-to-value. The third in a trio of new deals from the mutual sector came courtesy of Coventry Building Society, at 3.75 per cent fixed for two years to 70 per cent loan-to-value with a fee of £800.

Andrew Hagger is a money analyst at Moneynet.co.uk

Just 50 weeks to go now till Christmas...

THere's not been quite so much to cheer about in the savings market this week, with some fixed-rate bonds being pulled and others seeing rates reduced. The best deal on a one-year bond now stands at just 3.65 per cent with FirstSave, whereas a couple of months back, rates as high as 3.95 per cent were on offer.

It's not all bad news, though, with an innovative and flexible savings product launched by Yorkshire Building Society, aimed at saving for Christmas 2010. While Christmas may be the last thing on your mind at the moment, putting money aside throughout the year is a better option than relying on expensive credit card borrowing.

The account pays an excellent fixed rate of 3.5 per cent gross/AER and allows you to save up to a maximum of £1,200, either as a one-off payment, regular payments or in dribs and drabs throughout the year. You can't gain access to the money until 1 December 2010, which is not a bad thing, and you are able to fund the account by standing order, cash or cheque.

Coventry Building Society has just launched the latest version of its popular 1st Class Postal account, offering a variable rate of 3.3 per cent gross/AER. The postal-operated account offers a decent rate, including a 1.3 per cent AER bonus for the first 12 months plus the flexibility of four penalty-free withdrawals each year.