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

“Borrowers who are due to come off a cheap fixed rate deal will be on tenterhooks for mortgage rates to drop before they refinance, but if they have some months ahead to wait, it may be wise to consider overpaying. Over the course of the past 12 months, mortgage rates have been coming down and the average two-year fixed rate has dropped by almost 1%. The incentive to switch away from a Standard Variable Rate (SVR) remains prevalent, as on average the rate sits just shy of 8%. Any subsequent cuts by the Bank of England may well be passed on to variable rates, but fixed rates remain substantially lower and should incentivise borrowers to secure a new deal. A typical mortgage being charged the current average SVR of 7.95% would be paying £403 more per month, compared to a typical two-year fixed rate*.

“Since the Budget swap rates have been on the rise and lenders will no doubt be watching these closely. Traditionally, in reaction lenders may hike on sale fixed mortgage rates, but this can take a couple of weeks to be absorbed. However, any cuts to the Bank of England base rate (BBR) may well be considered by lenders, but falls are not guaranteed to be passed on outside of BBR linked tracker rates. Therefore, borrowers might not see much benefit in a small cut. The unprecedented volatility in interest rates seen over the past five years alone may persuade borrowers to act now and secure a longer-term fixed deal for peace of mind. As has been the case for two years now, it is cheaper to lock into a five-year fixed mortgage than a two-year deal, based on average rates.

“First-time buyers have until the end of March 2025 to take advantage of the First-Time Buyer’s Relief nil-rate tax threshold of up to £425,000, as it will drop back down to £300,000. Missing this window could be a brick wall of disappointment for would-be buyers who don’t have the ‘Bank of Mum and Dad’ to lean on to cover unpredicted costs. Any borrowers concerned about affordability must seek advice to review all the options available to them.”

*Average standard variable rate (SVR) is currently 7.95%. Calculations based on a £250,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,921 per month, versus £1,518 per month on 5.39% two-year fixed rate.

Savings market analysis

• Average rates across easy access and notice accounts have fallen since the start of August 2024, as providers made cuts in the aftermath of the Bank of England base rate cut of 0.25%. The average easy access rate has fallen from 3.15% since August 2024, the average easy access ISA rate has fallen from 3.36%.
• In November 2023, the average easy access account rate was 3.19%, higher than now, the average easy access ISA rate was slightly higher than now at 3.29%. Since the start of October 2024, the average easy access savings rate has fallen from 3.08% to 3.03% and the average easy access ISA rate fell from 3.28% to 3.24%.
• In November 2023, the average notice account and notice ISA rates were 4.31% and 4.12%, respectively. The average notice rate is now 4.22%, down from 4.29% in August 2024 and the average rate on a notice ISA has fallen from 4.22% to 4.05%. The average notice rate is down 0.02% from last month, the average notice ISA rate rose by 0.02%.

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

“Savers are the ones who feel the force of cuts to interest rates, and to add insult to injury, will see no rise to any personal tax or savings allowances in the short-term, making Cash ISAs increasingly attractive. Those savers who use their interest to supplement their income will feel overlooked if rates plummet. In December 2021, the average easy access rate stood at a pitiful 0.20% and it took months for this to rise above a measly 1% (November 2022 - 1.16%). However, the Bank of England base rate had risen from 0.10% to 2.25% over that time. Safe to say, it’s understandable that savers feel hard done by, barely seeing a return on their money and in fact, watching the true value of their cash eroded by unprecedented high inflation. This could in turn, create an almost apathetic attitude among savers today, even as the average easy access account pays around 3%, bank base rate is higher. Shockingly, there are UK current or savings accounts out there earning no interest whatsoever, £252bn worth in fact, according to the Bank of England.

“Loyalty is also questionable when it comes to savings rates, where some consumers may well get a promotional product as a new customer for a limited time, others who keep their cash stashed for convenience with the high street banks will be getting pitiful returns. The average easy access rate paid across the biggest high street banks is 1.91%**, which is far less than the current market average easy access rate across all savings providers. However, it is not all doom and gloom as savers can easily switch their flexible pots elsewhere. Challenger banks are offering attractive returns and it would be unwise to overlook them when they have the same protections in place as a high street bank. Savers need to proactively keep on top of the best rates and review their pots regularly to see if they are getting a raw deal.”

**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 5 November 2024.