Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

“Borrowers will be disappointed to see a rise to fixed mortgage rates over the past month, with the average five-year fixed rate hitting a six-month high. The recent volatility in swap rates has been a key driver to lenders reviewing their pricing. However, it does take a couple of weeks for lenders to catch up with a change in course, and swaps have been falling over recent days. The Bank of England base rate dropped by 0.25% in November 2024 to 4.75%, so it would not be surprising to see borrowers frustrated that fixed mortgage rates are going up. This demonstrates how fixed mortgages have other influences at play, and a base rate cut does not necessarily result in a surge of lenders cutting rates to their fixed rate range. Millions of borrowers are due to come off cheap fixed mortgages, so they will be waiting with bated breath for mortgage rates to fall. The incentive to switch away from a Standard Variable Rate (SVR) remains prevalent as a typical mortgage borrower being charged the current average SVR of 7.78% would be paying £355 more per month, compared to a typical two-year fixed rate*.

“The future of interest rate pricing remains unpredictable, but sticky inflation and wider economic uncertainty could limit the Bank of England’s Monetary Policy Committee from making aggressive cuts this year. However, there will be plenty of reasons for lenders to entice new business during 2025, and the Government wants them to do more to boost growth in the economy, thus the debate on the loosening of lending rules. The stamp duty deadline at the end of March is fast approaching, so first-time buyers would be wise to seek advice to see if they can get their foot on the first rung of the property ladder amid a short supply of affordable housing.”

*Average standard variable rate (SVR) is currently 7.78%. Calculations based on a £250,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,893 per month, versus £1,538 per month on 5.52% two-year fixed rate.

Savings market analysis

• Average rates across easy access and notice accounts have fallen since the start of February 2024. The average easy access rate has fallen from 3.17%, the average easy access ISA rate has fallen from 3.30%. The average notice account has fallen from 4.30% and the average notice ISA rate has fallen from 4.16%.
• Since the start of January 2025, the average easy access savings rate has risen from 2.90% to 2.92% and the average easy access ISA rate rose from 3.05% to 3.06%.
• The average notice rate is now 4.00%, unchanged since the start of January 2025 and the average rate on a notice ISA has risen from 3.89% to 3.92%.

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:

“Savers who rely on their cash savings to boost their income are at the mercy of lower interest rates. It has already been proven that cuts to the Bank of England base rate set the wheels in motion for the biggest banks in the country to cut rates, showing loyalty does not pay. The biggest high street banks pay an average of 1.66%** across easy access accounts, far less than the current market average easy access rate across all savings providers. In contrast, challenger banks have been working hard to entice new business, but they will not be able to escape making cuts if they sit too far ahead of their peers and the market sentiment for lower interest rates prevails in the months ahead. Over the past 12 months, the average easy access rate has fallen by 0.25%, which does somewhat take the shine off a month-on-month improvement to the returns of just 0.02%. Variable rate rises on popular easy access savings accounts will be short-lived if the market gets hit by more base rate cuts by the Bank of England.

“As income tax thresholds and tax-free savings allowances remain frozen, it is inevitable that some savers will breach their Personal Savings Allowance (PSA). A higher rate taxpayer will easily breach their £500 interest allowance if they are earning 5% on £10,000. It would then be little surprise for Cash ISA deposits to thrive this year as hordes of savers utilise their tax-free wrapper. Outside of Cash ISAs it is worth pointing out that there is around £300bn languishing in UK current or savings accounts earning no interest whatsoever, according to the Bank of England. Consumers must shake apathy and act now to review where they have stashed their savings, ensure they beat the eroding impact of inflation and protect it from tax.”

**High street banks include Bank of Scotland, Barclays Bank, Halifax, HSBC, Lloyds Bank, NatWest, Royal Bank of Scotland and Santander. Averages collected from gross interest rates paid across all live easy access accounts with these brands based on a £10,000 deposit, latest rates as at 3 February 2025.