Mortgage and Savings Rates Remain Volatile Despite Base Rate Hold
The Bank of England’s decision to hold the base rate at 5.25% has not brought the stability that many had hoped for in the mortgage and savings markets. According to a financial information website, mortgage and savings rates have been volatile in recent months, causing concern for borrowers and savers alike.
Mortgage rates have been creeping up
The average two-year fixed mortgage rate has risen from 5.91% at the start of May to 5.93% at the start of June, while the average five-year fixed-rate mortgage has edged up from 5.48% to 5.50% over the same period. The average standard variable rate (SVR) stands at 8.18%, which is unchanged month-on-month but slightly down from 8.19% in December 2023.
“The rising cost of mortgages may cause deep concern for borrowers about to come off a fixed-rate deal and needing to refinance.” - Rachel Springall, finance expert at Moneyfactscompare.co.uk
The impact of these rate changes can be significant. According to calculations from Moneyfactscompare.co.uk, a mortgage holder on the current average SVR could end up paying £287 more per month compared with if they were on an average two-year fixed-rate mortgage.
Savings rates have not fallen too much
In the savings market, the average easy access rate was 3.12% at the start of June, slightly up from 3.11% at the start of May but down from 3.18% at the start of December. The average easy access Isa rate stands at 3.31%, the same as it was at the start of December but slightly down on 3.33% at the start of May.
“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.” - Rachel Springall, finance expert at Moneyfactscompare.co.uk
The volatility in mortgage and savings rates is causing uncertainty for many. With around 1.6 million fixed-rate mortgages due to end or have already ended at some point in 2024, many borrowers are facing uncertainty about their future mortgage payments. Meanwhile, savers are struggling to find decent returns on their savings.
Mortgage applications are being affected by rate changes
The situation is not helped by the fact that many first-time buyers are taking out mortgage terms stretching beyond 35 years in order to make monthly repayments more affordable. This may provide short-term relief, but it could lead to higher interest charges over the longer term.
As the mortgage and savings markets continue to evolve, it’s clear that borrowers and savers alike need to be vigilant and prepared to adapt to changing circumstances.
