Not content with making history in cutting base rate to its lowest ever level of 0.5%, the Bank of England has now left it sitting there for a whole year.

Clyde regretted vowing not to shave until base rate started to rise

Throw in £200 billion of money straight off the quantitative easing printing press and it would seem the economy has been given every chance to find its feet.

Indeed, latest figures show that the recession has officially passed, but at what cost to the finances of Joe Public?

Mortgage borrowers who kept to their lender’s standard variable rate or on a tracker deal are likely to have been celebrating, as each month the Monetary Policy Committee announced there would be no change.

Two year fixed rate mortgage deals remain relatively cheap too, costing on average 4.74% today compared with 6.28% in October 2008, just before the base rate started its descent.

However, with one man’s pleasure often another’s pain, it is savers who have had an unhappy 12 months and more.

Before base rate began to drop, the average rate available on a no notice account stood at 3.71%, but stands at just 0.72% today

Notice accounts have seen their rates fall in that time too, dropping from 3.91% to 1.02%.

Also suffering have been cash ISA rates, dropping from 4.99% to 2.09% during the same period.

A year ago the average cash ISA rate stood even lower at 1.99%, but the slight improvement could soon slip away once ISA season draws to a close on 5 April.

That’s not to say decent savings deals can’t be found, it’s just they’re a little harder to nail down.

In the meantime, savers will be praying for a base rate rise soon, but would be unwise to start holding their breath.

Although the convalescence of the economy appears to be underway, most commentators agree that we’re not out completely of the woods just yet.

Uncertainty still lies round almost every corner. Which direction will house prices go next? Will inflation obediently follow Bank of England predictions and hit its 2% target in the medium term? And what will the outcome be when the ballet boxes are finally dusted down?

All are unknowns which combine to baffle far greater minds than my own.

Most predictions suggest the earliest chance of action would be a base rate rise towards the end of the year.

But your guess is as good as mine, or that of anyone else.

Tim Leonard, Senior Reporter, Moneyfacts Group

I seem to have been saying it for over a month now, but the annual ISA season is now well and truly under way. As we at Moneyfacts.co.uk reported last month, providers started making revisions to their existing ISA products and launching new ones up to a month earlier than is usually expected.

Image: Fidel knew when to switch

The reason behind the early kick-off is almost certainly due to increased competition amongst providers that are cash constrained and having to put more thought into trying to attract funds. But from a wider perspective, this scrap should be beneficial to savers, as a desire to secure deposits should equate to attractive rates of interest.

In the last week in particular, we have seen a number of new ISA issues and products achieve Best Buy status in the Moneyfacts.co.uk charts. While it is true that this season is unlikely to offer the headline rates seen in previous years – the Bank of England base rate will see to that – there are still deals that demand attention.

As you may or may not have noticed, the product news section of this website has been updated even more frequently than usual, with ISAs from Santander, Lloyds TSB, Skipton BS and Birmingham Midshires to name but a few all catching the eye. Rates of 3.00% or more can still be had on a one year product, scaling upwards the longer you are prepared to lock away your money.

It is a section worth keeping an eye on in the coming weeks, especially if you’re eyeing up a place to transfer your money.

And with more than nine in ten ISA products allowing transfers in, there really is no excuse for keeping your money in an account with a minimal rate of interest. Clichéd as it may sound, the great majority of us work hard for our money; in turn, we really should be making our money work hard for us.

Admittedly, saving is not fun; most consumers want to spend the minimum amount of time sorting out their finances. But it should be remembered that ISAs were originally devised to offer us a savings vehicle that, as well as sheltering our interest from the tax man, is portable, allowing people to transfer their allowance to leave behind uncompetitive rates and make more of their money.

Even if you are not planning on taking advantage of the new ISA limits – all savers will now be allowed to invest £10,200, with £5,100 allowed in cash – it is still worth having a look to see what is around. At the last count, there were 272 accounts allowing transfers in, so whether you want to lock your money away for a number of years on a high rate or want to give your savings a short, sharp shock, there should be an option for everybody.

James Henderson, Reporter, Moneyfacts Group

So Skipton Building Society has decided to scrap the ceiling on its standard variable rate (SVR) and increase the rate from 3.5% to 4.95%.

The promise that mortgage borrowers on the SVR would never pay more than 3% over base rate is no more…well, temporarily no more.

Image: ‘What’s all the fuss about scrapping ceilings?’

The society says that it had to respond exceptional market conditions, ones which have seen the Bank of England keep the base rate of interest at an historic, 315 year low of 0.5% since March last year.

The credit crisis has seen the funding that most banks and building societies rely upon to function become unusually expensive too.

Having had an exceptional circumstance clause written into its contracts since 2002, Skipton is perfectly within its rights to make the change that it has.

What is more, the rate remains below the average SVR of the top ten building societies of 5.12%.

But does this justify an action that will reportedly have a significant financial impact on around 30,000 borrowers immediately and possibly another 35,000 in the coming months?

Some clever people somewhere have worked out that the rate rise means a borrower with a £130,000 interest only mortgage will see £157 added to the cost of their monthly repayments.

Those with a similar sized repayment mortgage would see their monthly outlay rise by £105.

Perhaps the Skipton customers who can’t afford to meet their revised repayments could claim exceptional circumstances too and keep on paying their old amount?

To be fair to Skipton, it has not been the first lender to raise its SVR (other smaller lenders have done so while base rate has remained unchanged), and it is highly unlikely to be the last, particularly now that one of the big providers has broken ranks.

Borrowers with other providers could therefore soon find themselves in the same boat too.

All this suggests the time to move away from the SVR might soon be nigh.

Skipton’s SVR borrowers will undoubtedly be looking forward to the exceptional circumstances soon passing so that the ceiling can be reintroduced.

Let’s hope the ceiling hasn’t fallen in on their home ownership dream before then.

Tim Leonard, Senior Reporter, Moneyfacts Group

The British Chambers of Commerce has urged the Bank of England to cut interest rates further, ahead of the MPC's decision today. David Kern, chief economist at the BCC, believes the MPC should cut interest rates by a further half point in the face of a worsening recession and falling confidence. "The net effect of a rate cut, although reduced at very low levels, is still expansionary overall. Lower rates will have a positive impact on asset prices and on the banking sector's capital base," he added. He also stressed that the key objective should now be to launch quantitative and credit easing in a manner that helps restore the confidence of businesses and consumers. The call is in stark contrast with the view of the Building Society Association, which claims that another cut would represent a 'savage hit' to savers and would restrict lending to the struggling mortgage market. The rate, which is currently 1%, has been cut five times since October, when it stood at 4.5%.

Lenders are becoming increasingly reluctant to pass on reductions in the Bank of England base rate to their mortgage customers, according to Moneyfacts. Since the turn of the year, base rate has been reduced by a full percentage point to stand at a new record low of just 1%. Yet in that time, the average standard variable rate (SVR) in the mortgage market has fallen by just 0.31 percentage points to 4.83%. Average two year fixed rates have been cut by 0.49 percentage points to 4.94%, while the average two tracker rate is now 3.93%, 0.58 percentage points lower than at the start of January. Despite new tracker rates enjoying the biggest cuts, the margin taken by lenders continues to widen and now stands at three times base rate. Meanwhile, fixed rate mortgages are priced at more than double the cost of funding on the swap rate market.

"Lenders will only pass on cuts to a level they are happy to lend at, and for most this seems to have been reached," said Michelle Slade, analyst at Moneyfacts.

The number of loans approved for house purchase increased in December to 31,000, up from 27,000 the previous month, according to the Bank of England. However, the figure is still the second lowest ever reported, and is significantly lower than the 73,000 approved in December 2007. Loans approved for remortgaging slumped by 5,000 on November's figure to 36,000. Meanwhile data from the Building Societies Association (BSA) has revealed gross mortgage lending by building societies fell to £2,395 million in December, down from the £2,595 million seen in the previous month and £3,669 million in December 2007.

"Activity in the housing market remains very depressed, and as a result the amount of mortgage lending in December was low," said Adrian Coles, director-general of the BSA. "House prices are widely expected to fall further and unemployment is rising, so potential buyers remain cautious and are staying out of the market as they wait for it to stabilise."

Mortgage lending figures will remain low until lenders begin to offer better rates to people borrowing at higher loan-to-values (LTVs), according to Moneyfacts. Latest figures reveal that people at the end of their current mortgage deal with less than a 25% deposit are likely to be better off staying on their lender's standard variable rate (SVR) rather than opting for a new deal. While the average SVR now stands at 4.99%, average two year fixed rates are at 5.05%, but are considerably higher for people with a LTV of 85% and above. The average fixed rate payable at 90% LTV is currently 6.29%, yet the SVR at lenders such as Nationwide and Cheltenham and Gloucester is now just 3.50%.

There is simply no incentive at the moment for borrowers to go out and get a new deal," said Michelle Slade, analyst at Moneyfacts.co.uk. "If you only have a small amount of equity in your home, you are going to move onto your lender's SVR rather than pay over 6.00%."

I wouldn't be surprised if holidays have been cancelled at the Treasury, Bank of England and the Financial Services Authority over the next six months in an attempt to get all hands on deck to try and find a quicker resolution to the ‘Crunch' now renamed to 'Banking Crisis'. Unfortunately, there are thousands more who work outside these three buildings who have no alternative but to cancel their own holidays as a result of its harsh repercussions.

Weeks have now passed since the Bank of England's Monetary Policy Committee announced a shock 0.50 per cent cut in base rate. Expectations are that the committee will cut rates, at worst, by the same figure on Thursday. We all waited in anticipation to see some positive results of this action but half of mortgage lenders did not pass on any rate cut savings to their existing customers stuck on a standard variable rate. A growing number of lenders have cancelled out this rate cut by increasing their margins on base rate tracker mortgages for new customers and some are currently doing this again in preparation for next week's anticipated rate cut.

Therefore, there is a strong possibility that mortgage rates have now reached a plateau and rates may not fall much lower than current levels in the short term. One of the reasons for this is that the banks still do not have confidence in each other and the interest rate that they use to borrow money from each other (Libor) is just under 5.90 per cent, 1.40 per cent higher than the official bank base rate and is not falling quickly enough to allow banks to pass on any benefits. However, households on existing bank base rate tracker mortgages are receiving the full rate cut benefits at this point but they need to check their mortgage details to see if their lender has a 'collar rate', which is the lowest rate to which the lender is prepared to reduce your rate. For example, Nationwide BS has a collar on its tracker rate mortgages where it will not drop rates further if bank base rate reaches 2.75%.

Some commentators are suggesting that the Bank of England base rate may drop to two per cent or even one per cent, but in reality, we should not expect the full benefits of this to hit our pockets in the short term. Rates at these levels are designed to kick start the economy and benefits should only be noticed after at least eighteen months.

A consolation is that back in 1990, standard variable rates were above 15 per cent, but even when house prices were falling, banks were seen to have a collective stance and were still willing to advance up to 95 per cent of your property value.