Households experience the effects of a rising Bank rate through increased borrowing costs, while also benefiting from more competitive savings rates.
Against a global backdrop and amid market expectations of higher rates, numerous lenders have already increased costs for new fixed-rate mortgages.
Andrew Montlake, Chief Executive of mortgage broker Coreco, noted that the latest data indicates inflation remains largely unchecked.
“When inflation proves persistent, lenders’ funding costs remain under pressure, making cheaper mortgage products harder to deliver,” he explained.
“Lenders are already repricing upward, which will do little to calm markets,” the executive noted. “Borrowers should not panic, but those approaching the end of a fixed-rate term should seek options early and review them regularly.”
According to financial information service Moneyfacts, the average two-year fixed residential mortgage rate has reached its highest level since 11 May, at 5.77%, while the average five-year rate has climbed to its highest since 8 November 2023, at 5.83%.
Savers may receive more generous returns, though the purchasing power of their savings could be eroded by the continuing cost-of-living crisis.
“Timing the market perfectly is nearly impossible,” said Harriet Guevara, Chief Savings Officer at Nottingham Building Society. “I urge households to focus on what best suits their needs now, as well as in the medium and long term.”
“Savers should regularly verify that their savings are earning a competitive return and strike the right balance between easy access and longer-term deposits they can afford to set aside.”
