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

“Mortgage rates are heading in a downward trajectory, which will delight borrowers looking to get a new deal this year. The average rate charged on a two- and five-year fixed rate mortgage has plummeted by more than 1% over the past six months and there are hopes rates will continue to drop. However, those borrowers who are about to come off a two- or five-year fixed rate deal will likely face higher mortgage repayments, whether they grab a fixed deal or sit on their revert rate. First-time buyers may still be sitting on the fence as to whether now is the time to get their foot on the property ladder, due to both the uncertainties around interest rates and house prices and the stark reality of affordable housing remaining in short supply. Any borrower concerned about their existing mortgage or looking for a deal would be wise to seek advice and support from their lender or an independent broker.

“The recent volatility surrounding fixed mortgage rates may make it more pressing for borrowers to secure a deal as soon as possible, particularly as there are now a few lenders offering fixed rates below 4%. Lenders can pull deals if they have an influx of applications, and a volatile swap rate market can put pressure on pricing where margins are already tight. It would be inevitable to see a mix of both fixed rate rises and cuts when lenders endeavour to manage consumer demand, any targets and future rate expectations.

“Locking into a fixed rate mortgage is ideal for borrowers who are confident their circumstances will not change over the next few years, and will ultimately give them some peace of mind surrounding future rate changes. However, some consumers may not be able to afford to refinance and feel stuck on their Standard Variable Rate (SVR), where the average rate is above 8%. A typical mortgage being charged the current average SVR of 8.17% would be paying around £330 more per month, compared to a typical two-year fixed rate (5.56%)*”

*Average standard variable rate (SVR) is currently 8.17%. Calculations based on a £200,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,566 per month, versus £1,235 per month on 5.56% two-year fixed rate.

Savings market analysis

• Since the start of August 2023, the average easy access savings rate has risen from 2.81% to 3.17% and the average easy access ISA rate has risen from 2.86% to 3.30%. These average rates rose month-on-month from 3.15% and 3.25% respectively.
• On a notice account, the average rate has risen from 2.55% to 4.30% since August 2023. The average rate on a notice ISA has seen similar growth, up from 3.65% to 4.16%. However, these average rates fell month-on-month from 4.39% and 4.21% respectively.

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

“The savings market continues to offer a variety of options for consumers with different aspirations. Those who need quick access to their cash will be pleased to see returns on easy access accounts are thriving. Despite significant drops on fixed rate accounts, variable rates have been relatively stable or indeed risen over the past six months. It is worth noting that the last base rate rise was back in August, so many providers would have passed on any rise to consumers by now, so more recent booms are more linked to providers’ attempts to draw in new business.

“As we have seen in the past, any cuts to base rate, or indeed expectations for interest rates to drop, can have a notable impact on variable savings rates, so it will be interesting to see how resilient the market will be in the months to come. Savers must not be apathetic and assume they are benefitting from rate rises on their existing account. It is imperative consumers are proactive to review and switch their savings account if their loyalty is not being rewarded.

“Cash ISA variable rates on easy access ISAs have risen month-on-month and we are already seeing providers gear up for ISA season with new deals and attractive rates. It is wise for consumers to take advantage of their ISA allowance, particularly if they are a higher rate taxpayer, as the current best rates could see them breach their personal savings allowance (PSA). Savers would do well to review any existing pots and switch their ISA to a better deal to maximise the interest they earn, and not encash them to keep their tax-free status. As the new ISA reforms take effect on 6 April, now is a great time for consumers to explore how the changes will benefit them. Those comparing rates will find some of the best easy access accounts and ISA equivalents are available online, from both challenger banks and mutuals. Building societies are primed to support their customers with competitive rates and challenger banks are working hard to draw in deposits to fund their future lending, so this competition is great news for savers.”