Mortgage rates continue their downward trend, but savers are at risk of looming Bank of England rate cuts. Moneyfactscompare.co.uk has analysed the average rates offered across savings and mortgages and how the markets have changed over time.
Mortgage market analysis
- The average standard variable rate (SVR) has fallen further below 8% month-on-month and stands at 7.58%, down from 8.18% a year ago.
- Since May 2024, the average two-year fixed rate has fallen from 5.91% to 5.18% and the average five-year fixed rate has fallen from 5.48% to 5.10%; both are down month-on-month. These average rates were 5.32% and 5.18% respectively last month.
- On a 10-year fixed rate mortgage, the average rate was 5.97% in May 2024. This rate has fallen to 5.51% and is down month-on-month.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:
“Mortgage rates are on a downward trend, which will be welcome news for the millions of borrowers looking to refinance this year. The driving force behind the recent falls has been volatility in swap rates, with lenders rushing to pass on cuts to fixed rates in their range. This momentum has led to the average two-year fixed rate dropping to its lowest point since September 2022, which was a few weeks prior to the notorious fiscal announcement, or ‘mini-Budget’, that saw markets panic and mortgage rates skyrocket. The mortgage market is undoubtedly calmer now by comparison, despite a rush to reprice fixed deals, but lenders are going to have to work incredibly hard in the coming months to balance new business and keep a close eye on their rate margins. Those borrowers coming off a cheap fixed rate would be wise to refinance or risk seeing their monthly repayments soar by falling onto a higher revert rate. Despite consecutive falls to the average Standard Variable Rate (SVR), the incentive to switch remains as a typical mortgage borrower being charged the current average SVR of 7.58% would be paying £373 more per month, compared to a typical two-year fixed rate.
“There is an expectation (though subject to much debate) that the Bank of England base rate will be cut several times before the year is over, due to wider economic uncertainty and concerns over inflation. Those borrowers concerned about their homeownership aspirations will need support and innovation from lenders. First-time buyers are the lifeblood of the mortgage market, and they are essential to keep the market moving. Not everyone can rely on the ‘Bank of Mum and Dad’ so borrowers could be exhausting all their savings to secure their dream home. This then can pose a danger should house prices plummet, as it can leave borrowers in negative equity and, in the worst instances, turns them into mortgage prisoners. Borrowers need to feel comfortable with their mortgage and understand the implications of missing any repayments. Any relaxation to stress tests must be deployed with care and not to the detriment of borrowers later down the line. Consumers concerned about their mortgage or struggling to find an affordable home would be wise to seek advice from a broker to assess the latest deals.”
Average standard variable rate (SVR) is currently 7.58%. Calculations based on a £250,000 mortgage over a 25-year term on a repayment basis. SVR repayment £1,860 per month, versus £1,487 per month on 5.18% two-year fixed rate.
Savings market analysis
- Average rates across easy access and notice accounts have fallen since the start of May 2024. The average easy access rate has fallen from 3.11%, the average easy access ISA rate has fallen from 3.33%. The average notice account has fallen from 4.27% and the average notice ISA rate has fallen from 4.17%.
- Since the start of April 2025, the average easy access savings rate has risen from 2.77% to 2.79% and the average easy access ISA rate fell from 3.04% to 3.03%.
- The average notice rate has fallen from 3.81% to 3.78% since the start of April 2025 and the average rate on a notice ISA has fallen from 3.72% to 3.71%.
Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, said:
“Saving little and often is the key to building a nest egg, but rate cuts can have a disastrous impact on the savings habit. Apathy can lead to savers making the wrong choices with their pot, such as leaving it in their existing current account or an account tied to it which pays a poor return. Those earning paltry rates are at risk of having the real value of their hard-earned cash depreciate in real terms, because their pot should instead be earning a rate that fends off the eroding impact of inflation. Inflation sits above its 2% target and the biggest high street banks pay an average of 1.63%** across easy access accounts, far less than the current market average easy access rate across all savings providers. Convenience comes at a cost if savers are not prepared to shop around and switch their pots. There are several challenger banks and building societies offering decent inflation-busting returns on some of the most flexible easy access accounts, but savers just need to carefully check the terms of these accounts before they invest, such as those with withdrawal restrictions. The Bank of England base rate is expected to fall further this year, which will be disastrous news for savers and will make it essential for them to regularly review the rates on their savings pots.
“It has now been around a month since the start of the 2025/26 tax-year, so savers who have not yet taken advantage of their ISA allowance would be wise to do so. There have been rumours of a cut to the cash ISA allowance, to encourage consumers to invest in stocks and shares, but these won’t be suitable for everyone. There is no denying that ISAs are a safe haven for consumers who want to protect their savings from tax, and these will remain popular in the coming years. The number of consumers expected to pay higher-rate tax at 40% this tax-year has been estimated at around 2.5 million, according to the Office for Budget Responsibility (OBR). This means many savers may unexpectedly breach their Personal Savings Allowance (PSA), which allows basic rate taxpayers to take home up to £1,000 worth of savings interest tax-free each year but only £500 for higher rate taxpayers. Now is an ideal time for savers to explore the top rate cash ISAs and take full advantage of their ISA allowance.”
**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 1 May 2025.
