The interest rate story seems to be turning into a horror show for borrowers. A nervous flutter will have rippled through the hearts of homeowners this week after an inflation report from the Bank of England signalled yet another rise in the base rate.

But borrowers should remember that this rise has been factored in to mortgage prices for some time now. Swap rates, the markets that determine fixed-rate pricing, not only take into account current interest rates, but future movements, too. Swap rates were hovering at about 6.3 per cent at the beginning of last month – well above the actual base rate of 5.75 per cent. They fell to 6.15 per cent during the month, but this week bounced back to 6.22 per cent.

Yet just as most horror films have their feel-good moments, the interest rate story does, too. Rather than putting up rates after the Bank’s latest inflation report, some lenders have used the increased certainty about the direction of rates to cut their prices. It helps that the time is ripe to make a grab for a bigger slice of the market as hundreds of thousands of homeowners look to renew their short-term mortgage deals.

Woolwich shaved three tenths of a percentage points off its two-year fix this week and Northern Rock is set to cut its rates, too. The Cooperative and Saffron building societies have also cut their variable-rate deals.

Borrowers should ignore the gnashing of teeth and go shopping for a good deal (not forgetting to take into account any arrangement fees, of course).

The Government is too free with your cash

In case you missed it, your money has been provoking a fiery debate this week. MPs are falling out with the Government about it and banks and building societies are busy arguing their corner, too.

There is an estimated £400 million lying in forgotten savings and current accounts. The Government wants the cash in these “dormant” accounts to go to good causes. Banks and building societies agree but are keen that the scheme should be voluntary. An influential committee of MPs has said that the scheme should be compulsory and that National Savings & Investments should take part, too.

The plan to use this cash for good causes is laudable but I’m sure that most of you would prefer to spend your money as you wish.

Before the scheme is launched, banks and building societies will get in touch with customers to try to reunite them with their forgotten accounts. But why wait for your bank to track you down? The likelihood is that the cash you deposited all those years ago is now in a closed account earning paltry interest. Ten years ago Northern Rock paid 6.6 per cent on £5,000 in its Select Instant Access account. The account, which is closed to new business, now pays only 1.56 per cent on the same sum.

It’s time to wake that money and get it working for you again. If you think that you or a relative may have an account that has been overlooked for many years, go to timesonline.co.uk/money for tips on how to find it.

Savings rates make the taxman look generous

Making sure that your money is working for you should not just be confined to tracking down lost accounts. Savings accounts that you opened only months ago could have already lost their lustre, as we explain on page 14.

In fact, some banks are paying such appalling rates that even the taxman offers a better return. This week Revenue & Customs increased the interest it pays to those who mistakenly pay too much tax, from 3 per cent to 4 per cent. This is well below the base rate, but it is still 40 times more than First Direct pays on savings of less than £500 in its Everyday savings account.

The refund you receive from the taxman after overpaying your tax bill will also be three times more rewarding than putting your cash in Halifax’s Liquid Gold account, which pays only 1.36 per cent. Indeed, the taxman pays more than the average rate of return offered by hundreds of savings accounts.

A Revenue spokesman even suggested that if the “interest rate on overpaid tax was too high, it may encourage ‘banking’ with us”. Oh Mr Taxman, stop hiding your light under a bushel.