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

“As we edge closer to the end of the year, borrowers may feel frustrated that mortgage rates have not fallen by bigger margins during 2024. Mortgage holders will be hoping that the Bank of England base rate will fall further next year, and if swap rates calm, this can lead to lower fixed mortgage rates. Cuts to the base rate may also delight borrowers who are stuck on a variable rate deal or are soon to come off their low-rate fixed deal, indeed there are estimated to be millions of borrowers due to refinance in 2025. The incentive to switch away from a Standard Variable Rate (SVR) remains prevalent as a typical mortgage being charged the current average SVR of 7.85% would be paying £366 more per month, compared to a typical two-year fixed rate*.

“Those looking to fix for longer will find the average five-year fixed rate has not fallen as much as its two-year counterpart in 2024, but borrowers may well choose them for peace of mind. Mortgage rates have been volatile this year, particularly surrounding the Budget when swap rates rose and caused lenders to re-think their future rate pricing. This spells uncertainty for borrowers as there really is no way of predicting where rates will go. Those concerned should seek advice to get a grasp on the latest deals available to them. First-time buyers in particular need support to help their deposits stretch a bit further as affordable housing is in short supply.”

*Average standard variable rate (SVR) is currently 7.85%. Calculations based on a £250,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,904 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 2024. The average easy access rate has fallen from 3.15% since the start of 2024, the average easy access ISA rate has fallen from 3.25%. The average notice account has fallen from 4.39% and the average notice ISA rate has fallen from 4.21%.
• In December 2023, the average easy access account rate was 3.18%, higher than now, the average easy access ISA rate was higher than now at 3.31%. Since the start of November 2024, the average easy access savings rate has fallen from 3.03% to 2.96% and the average easy access ISA rate fell from 3.24% to 3.16%.
• In December 2023, the average notice account and notice ISA rates were 4.44% and 4.25%, respectively. The average notice rate is now 4.10%, down from 4.22% in November 2024 and the average rate on a notice ISA has fallen from 4.05% to 3.97%.

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

“Savers have been hit hard by rate cuts in the aftermath of reductions to the Bank of England base rate this year, with the average easy access rate dropping by its biggest monthly margin in over four years; it is now below 3%. The decline in interest rates is particularly worrying for those who use their savings interest to supplement their income. Savers have had the real spending power of their cash eroded by inflation, but as this contracted closer to the BoE’s 2% target, base rate cuts ensued. It will be interesting to see how hard savers are hit next year, as several base rate cuts are anticipated if inflation is kept under control. Not only this, but as tax-free allowances and income tax thresholds are frozen, some savers may breach their Personal Savings Allowance (PSA) and flock to Cash ISAs to protect their savings interest from tax.

“It would not be surprising for savers to feel disheartened entering 2025, and others may have an apathetic attitude to save if rate competition stalls. However, it’s imperative that consumers put some time aside to save little and often to build up a nest egg as an emergency safety net and switch often to ensure they are getting the best return they can on their hard-earned cash. Loyalty does not always pay, and savers may be getting an exceptionally awful deal if they have their cash stashed with one of the biggest high street banks. The average easy access rate paid across the biggest high street banks is 1.79%**, which is far less than the current market average easy access rate across all savings providers. However, there are other brands not to overlook as challenger banks have been working hard throughout 2024 to entice savers’ deposits to fund their future lending and building societies have some competitive returns on offer to reward their members.”

**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 17 December 2024.