Savers given 'higher for longer' boost - but there's '£1,700' alert

A "higher for longer" outlook could lift savings returns, but there's a huge caveat. That is, according to new analysis from Moneyfactscompare.co.uk, new borrowers still face rising mortgage costs of up to £1,700. The latest update from the financial product price comparison company said that, since the previous inflation announcement to this week's news that prices were rising by 3.3% in an upward trend since the start of the latest Middle East conflict, the Moneyfacts Average Mortgage rate had risen from 5.50% to 5.71%. Meanwhile, the average two-year fixed rate had risen from 5.56% to 5.83%. The average five-year fixed rate was up from 5.54% to 5.73%. The analysts said borrowers were still facing an over £1,700 yearly increase on an average two-year fix or over £1,300 on the average five-year fix based on a typical £250,000 mortgage over 25 years since the Iran conflict began, despite rate hikes stabilising. Some of the biggest lenders, such as HSBC, Lloyds Bank Halifax and Barclays Mortgage reduced their fixed rate mortgages by up to 0.37% in the past week, it noted. Caitlyn Eastell, personal finance analyst at Moneyfactscompare.co.uk , said: “Rising mortgage rates seem to have stabilised as average rates have held firm in recent weeks. However, borrowers could still be facing a £1,700 yearly increase on a two-year fix or £1,300 on a five-year fix since the conflict in Iran began. "Swap rates have edged closer to 4% and this has spurred a handful of the biggest lenders to start introducing cuts. Markets are still sensitive to sudden shifts, so it remains to be seen how long this will be the case. Homebuyers will need to evaluate their affordability because rates could stay higher for longer as the Bank of England tries to bring inflation back towards its target.” The experts said that the Consumer Price Index (CPI) rose to 3.3% during March, from 3% in February. The Bank of England’s projection rate for inflation during Q1 2027 is 1.7%. The Moneyfacts Average Savings Rate currently sits at 3.46%, which is higher than inflation, meaning savers can get real returns on their cash, it said, but it was still important to shop around for the best rates. It said there were currently 1,582 savings accounts that beat inflation - 139 easy access, 131 notice accounts, 138 variable rate ISAs, 387 fixed rate ISAs and 787 fixed rate bonds. In April 2025, there were 1,608 deals that could beat CPI which was then at 2.6% (March 2025 CPI) and in April 2024, there were 1,364 deals that could beat CPI which was at 3.2% (March 2024 CPI). Caitlyn said: “The fading rate environment attitude at the start of the year has U-turned as fresh inflation shocks continue to shift base rate expectations. By Q3, inflation is expected to hit 3.5%. The last time it was around this figure there were 1,224 deals that could beat CPI but based on today’s rates there would be over 200 more. "The ‘higher for longer’ stance could temporarily push this number even higher, giving savers unrivalled choice, however, providers may not be able to maintain these competitive margins as markets remain volatile. During times of uncertainty, some savers may place higher value on flexibility. "Easy access accounts can be useful to help manage monthly volatility, giving savers the freedom to respond to unexpected costs. Today the top easy access account edges ahead of even the top fixed bonds, on £10,000 that equates to a small £5 yearly advantage, but this can quickly grow on larger sums. However, savers not willing to bet on variable rates remaining elevated may be willing to sacrifice the higher rates for guaranteed returns. “Savers face a tricky balancing act. While they may be able to enjoy more competitive returns in the short-term, inflation will quickly catch up, eroding their hard-earned cash. In any case it’s crucial savers shop around for deals that pay over 3.3% to ensure they aren’t left out of pocket.” Moneyfacts explained that its savings product numbers included deals that were available to UK residents - easy access accounts, notice accounts, fixed rate bonds, variable Cash ISAs and fixed Cash ISAs - and excluded regular savers, children’s savers, variable rate fixed term bonds or ISAs, JISAs and LISAs, based on a £10,000 deposit, gross rates. Higher rates may be available for other levels of deposit, it added.