Interest rate impact - Rates rise and fall across savings and mortgages

9th May 2024

Interest rates for savers and borrowers have shown mixed signs of both rises and falls over the past six months. Moneyfactscompare.co.uk has analysed the average rates offered across savings and mortgages and how the markets have changed over time.

Since the start of November 2023, the average two-year fixed rate has fallen from 6.29% to 5.91% and the average five-year fixed rate has fallen from 5.86% to 5.48%. These average rates have also risen from 5.80% and 5.39% respectively since last month.

On a 10-year fixed rate mortgage, the average rate has risen from 5.75% to 5.97% since November 2023. The rate has risen from 5.77% since the start of April 2024.

The average standard variable rate (SVR) stands at 8.18%, down from 8.19% in November 2023. The rate has not changed since the start of April 2024.

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



"Borrowers may be disappointed to see fixed mortgage rates are on the rise. As has been the case since October 2022, the average five-year fixed mortgage rate remains below its two-year counterpart, which edges ever closer to 6%, not seen since December 2023. Lenders have been busy reviewing their fixed rate pricing in response to volatile swap rates, seeing month-on-month rises. However, fixed rates are lower than they were six months ago, so consumers who are now coming off a two- or five-year fixed mortgage would be wise to act quickly to grab a competitive deal, particularly as some lenders have withdrawn deals priced below 5%. The mortgage market continues to be fluid despite no change to the Bank of England base rate since August 2023, and market forecasts have pushed back imminent cuts, due to stubborn inflation.



"Affordability continues to pose a challenge to buyers due to interest rates being higher than they may have expected this year, but also the persistent lack of affordable housing. This is having a notable impact on first-time buyers, who may have exhausted all their savings to raise a substantial deposit, and do not have the Bank of Mum and Dad' to help them buy their first home. Those borrowers looking to remortgage may also face much higher repayments when they come off their deal, but they would still pay less with a fixed mortgage than on a revert rate, based on average rates.

The average Standard Variable Rate (SVR) stands above 8%, so it's much higher than the average two-year fixed rate. A typical mortgage being charged the current average SVR of 8.18% would be paying around £290 more per month, compared to a typical two-year fixed rate (5.91%)*.

Borrowers concerned about grabbing a new deal would be wise to seek advice from an independent broker, and any existing customers should speak to their lender if they are struggling with repayments."

*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 £1,277 per month on 5.91% two-year fixed rate.

Savings market analysis

Since the start of November 2023, the average easy access savings rate has fallen from 3.19% to 3.11% and the average easy access ISA rate has risen from 3.29% to 3.33%. The average easy access rate remained unchanged since April 2024, but the average easy access ISA rate fell month-on-month from 3.38%.

On a notice account, the average rate has fallen from 4.31% to 4.27% since November 2023 and the average rate on a notice ISA rose from 4.12% to 4.17%. The average notice rate remained unchanged since April 2024. The average notice ISA rate rose from 4.16% since the start of April 2024.

Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said, "Savers will find variable rates have remained rather robust over the past six months, but there have been cuts made to easy access accounts. They remain a firm favourite with savers, and there is hope that the market will stay resilient over the next few weeks, as expectations of an imminent base rate cut have waned. Challenger banks and building societies continue to offer the top easy access rates, so savers would be wise to review their account and switch if their loyalty is not being rewarded. One area of the market to thrive over recent months has been Cash ISAs; easy access returns have fallen recently, but unlike accounts outside of an ISA wrapper, they are higher than they were six months ago. A positive ISA season has been the key to improving accounts for savers this year, ideal for those looking to protect their cash from tax.

"Consumers worried that interest rates are due to come down this year may want to grab a deal quickly and review their existing pots. Variable savings rates can change at any time and, as we have seen in the past, a base rate cut can have a detrimental impact on the savings market.

Those prepared to lock their cash away for a guaranteed return could grab a fixed rate bond, as some one-year deals still pay over 5%, but six months ago there were some paying 6%. Whichever account savers choose, any clear indications of an impending base rate cut could lead to an upheaval in the market, so savers must not be complacent.

As is evident, many of the top rate deals can be cut or withdrawn quickly if providers are facing an influx of deposits, so savers need to keep a close eye on the top rate tables to not be left disappointed."