PERSONAL ACCOUNT

The cost of borrowing will rise from here, whatever happens to Bank Rate

Mortgage rates broke another lowest-ever record on Tuesday when a new two-year loan came on the market charging less than 1pc.

Borrowers with at least a 35pc deposit can borrow money from HSBC for two years at a cost of just 0.99pc. Nothing has been that cheap to date.

But whatever happens to interest rates in the coming months, the likelihood of mortgage rates falling further is slim to zero. I’ll bet on it. Here’s why. Economic shocks and faltering growth might result in lower central bank interest rates, including cuts to the Bank of England’s Bank Rate, but mortgage rates won’t followsuit.

Mortgage insiders say this deal of HSBC’s at 0.99pc is already lossmaking. The bank is lending at these low rates (and it may not be lending very much) to capture market share or for other commercial reasons best known to itself.

There is already too little margin between the rates banks pay to attract depositors or current account customers and the rates they charge borrowers for the gap to close further. Something will have to give, but what?

Savers are already in desperate straits. You only have to look at the graph on Page 3 to see what they’ve suffered. Returns have halved on the most popular accounts in a period of five years – during which time, by the way, Bank Rate has stayed flat at 0.5pc.

Scant flesh remains there to take the knife to.

If Bank Rate were to fall further you could expect two things to happen: there would be an increase in sundry account charges for in-credit bank customers (fees for statements, for transfers, for chequebooks, etc) and there would be an increase in rates for borrowers.

This is what is happening in countries such as Switzerland, where interest rates have fallen below zero.

Of course, any severe crisis within the banking sector would have a more immediate effect of pushing up mortgage costs sharply, as banks lost confidence in one another and capital became less abundant.

Whatever happens, mortgages will get dearer from here. If you want to fix a mortgage rate or switch to a cheaper deal, do it now.

I’m prepared to admit that much about personal finance is dreary. Essential, yes, unavoidable, yes, and even potentially life-changing – but not often laugh-out-loud fun.

This coming week is the 50th anniversary of Barclaycard, Britain’s most widely held credit card and the first to be launched here.

In today’s age of onerous regulation and readiness to blame, it’s easy to be censorious about the advent of mass credit. It’s easy to say Barclaycard was the evil that got us hooked on spending beyond our means and that Barclaycard was the point at which old-fashioned bankers morphed into sleazy salesmen.

I was not alive in 1966 but by most accounts the first credit cards were welcomed. They were sold by glamorous “Barclaycard Girls” from the back of buses and caravans and inside improbably bright and pleasant-looking bank branches.

Later on came other great campaigns: the hilarious adverts featuring Rowan Atkinson, for instance.

How did we go from there to our current, drab world, where all financial promotions are so bound in “compliance” that they’re entirely incomprehensible – as well as dull?

Millions of us enjoy the convenience of credit cards and manage them perfectly well – without having to be force-fed a litany of rules and warnings.

Today’s finance adverts are so dreary and drab and rulebound

Fifty years ago, when Barclaycard came on the scene, financial advertising could be fun. Not any more, alas