The Week Unzipped

CREDIT card borrowing costs hit 13-year high

The cost of borrowing on credit cards has soared to a 13-year high, with an average interest rate of 18.9 per cent, according to Moneyfacts.

Interest rates have increased since the economic downturn and hit the record high despite the base rate remaining at a record low of 0.5 per cent for the last two years.

Borrowers with 5,000 of debt on their card, who repay the minimum each month, will pay back an additional 2,360 over the life of the loan, compared with February 2006.

Banks blame the increased risk of lending for pushing up rates. Moneyfacts said competitive deals for balance transfers and introductory purchases remain on offer, but card providers are selective over who they accept for these deals.

Property prices fall

HOUSE prices fell 0.1 per cent in January, the fifth decline in seven months, according to figures from Nationwide. The average cost of a home was 1.1 per cent less than in January 2010.

The Bank of England revealed mortgage lending was down by 3.15 billion in 2010, compared with the previous year, shrinking to the lowest level since records began. In December, homeowners repaid more than they borrowed for only the third time ever.

Mortgage approvals fell 10 per cent in December as market activity remained subdued.

However, the number of prime residential mortgage products on the market has doubled since 2009, according to data from Moneyfacts. Borrowers with a 20 per cent deposit have seen a threefold increase in the number of deals on offer. The proportion of mortgages requiring more than a 25 per cent deposit has fallen to a two-year low.

Isa rates raised

WITH two months left in the financial year, banks and building societies are offering new products for savers to use up their tax-free allowance.

Nationwide has increased the bonus rates on its e-Isa and Champion Isa products and extended the bonus expiry date for new customers.

The e-Isa customers will earn 2.9 per cent, including a 1.15 per cent bonus, on all balances over 1. The online account allows unlimited withdrawals. The bonus expiry date has been extended to 21 July, 2012.

The Champion Isa now pays 2.7 per cent, including a 1.21 per cent introductory bonus, on balances over 1,000. The bonus expiry date has been extended until 20 June, 2012.

Yorkshire Building Society has launched a fixed-rate Isa at 3.5 per cent. The account, available in branch or by post, requires an opening balance of 100 and accepts new money and transfers from external products.

Leeds has introduced a base-rate tracker Isa paying 2 per cent above base rate, currently 2.5 per cent, for two years. The minimum balance is 1 and the account allows transfers in. The account can be opened in branch, by post or online.

New bonds launched

NATIONWIDE has launched a new 18-month tracker bond and e-bond paying up to 2.6 per cent. The bonds allow deposits of between 100 and 50,000 and pay between 2.25 per cent and 2.6 per cent, depending on the account balance..