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

“The rising cost of mortgages may cause deep concern for borrowers about to come off a fixed rate deal and needing to refinance. Affordability is a pressing point for both homeowners looking to refinance and new buyers, so those struggling to see how they can afford mortgage repayments will no doubt be desperate for interest rates to come down. Homeowners unsure on whether to lock into a new fixed rate mortgage may still find it more affordable than falling onto a Standard Variable Rate (SVR), which stands above 8%. This rate has almost doubled since the Bank of England started increasing base rate back in December 2021. A typical mortgage being charged the current average SVR of 8.18% would be paying £287 more per month, compared to a typical two-year fixed rate (5.93%)*.

“Due to volatile swap rates, lenders have been increasing fixed mortgage rates, but are also withdrawing some deals priced below 5%. As a result, the average two-year fixed rate is nearing where it stood six months ago, undoing the positive rate cut momentum seen during the first quarter of 2024. The average five-year fixed rate has remained above 5% since June 2023, dipping above and below 6% over the past six months. At present, it’s cheaper to lock into a five-year fixed mortgage than a two-year deal, based on average rates, which has been the case since October 2022. First-time buyers who are struggling to get their foot onto the property ladder and don’t have the ‘Bank of Mum and Dad’ to lean on may feel getting a mortgage is too far out of reach right now. Regardless, the uncertainty surrounding interest rates should make it vital for borrowers to seek advice from an independent financial adviser to review all the options available to them.”

*Average standard variable rate (SVR) is currently 8.18%. Calculations based on a £200,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,567 per month, versus £1,280 per month on 5.93% two-year fixed rate.

Savings market analysis

• Since the start of December 2023, the average easy access savings rate has fallen from 3.18% to 3.12% and the average easy access ISA rate stands at 3.31%, as it did six months ago. The average easy access rate has risen since May 2024, but the average easy access ISA rate fell month-on-month from 3.33%.
• On a notice account, the average rate has fallen from 4.44% to 4.26% since December 2023 and the average rate on a notice ISA has fallen from 4.25% to 4.14%. The average notice rate and average notice ISA rate fell month-on-month.

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

“Savers looking for a flexible pot to store their hard-earned cash may feel relieved that rates have not fallen too much over the past six months. The top rate tables continue to be dominated by challenger banks and building societies, but with the average rate on easy access accounts around 3%, there will be many savers out there getting a poor return. It is very unpredictable to know where interest rates are going, but the consecutive base rate hikes from the Bank of England between December 2021 and August 2023 worked in favour of savers. The Cash ISA market has also seen a flurry of activity over the past six months, but variable rates are slightly down month-on-month. However, this should not deter savers from reaping the benefits of investing cash in an ISA wrapper, to protect any interest earned from tax.

“Consumers would be wise to review their rate if they have not done so over the past six to 12 months. Loyalty does not always pay, and the average rate paid across the biggest high street banks** is 2.01%, which is 0.05% less than it was six months ago. Year-on-year, they have risen by 0.57%, from 1.44%, but this compares to a year-on-year rise of 0.91% across the entire easy access market. Some savers are therefore missing potentially more interest that could be earned from the more unfamiliar brands. As variable rates can fall as well as rise, some savers may want to take advantage of a fixed rate bond or ISA for a guaranteed return if they are concerned interest rates will fall in the months to come. Whichever savings account consumers choose, it’s important they are aware of any restrictive criteria, keep on top of the best rates across the savings spectrum and proactively switch.”

**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 19 June 2024.