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UK homeowners have seen average mortgage rates rise over recent months, despite the Bank of England cutting its base rate twice since October 2024. At the same time, savers have been hit with a steeper return decline, more than double the pace of the base rate reductions.
According to new research from financial comparison platform Finder, the disconnect between base rate movements and the rates passed on to consumers has grown increasingly stark.
Between October and March, the central bank lowered its base rate by 0.5 percentage points — from 5% to 4.5% — a 10% drop. But during that same period, the average rate on a two-year fixed mortgage with a 25% deposit rose from 4.41% to 4.54%, peaking at 4.66% in February. Five-year fixed deals followed a similar trajectory, rising from 4.06% to 4.32%.
Meanwhile, savers have seen returns on their deposits fall at a far greater pace. A 10% drop in the base rate might imply a modest decline in savings rates — perhaps from 2.58% to around 2.3% for a variable cash ISA. In reality, the average rate has fallen by nearly 25%, dropping to just 1.96%.
Kate Steere, savings and mortgages expert at Finder, said: “Homeowners could reasonably expect lower mortgage rates to follow base rate cuts, but instead, they’ve faced rising costs in recent months. At the same time, savers have seen average rates fall by far more than the base rate itself. The result? Consumers are losing out both ways."
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Steere added that while recent signs of easing mortgage rates—partly in response to geopolitical developments such as US presidentTrump’s tariff announcement—may offer some hope, the relief may be short-lived.
“With Trump’s recent tariff announcement and subsequent reports of mortgage rates finally dropping, many will be hoping to see a reduction in their monthly payments after months of bad news. But this is too little, too late for some consumers — and how long will it actually last?”
With inflation risks looming and the Bank of England remaining cautious about long-term rate policy, uncertainty continues to cloud the outlook for borrowers and savers.
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Steere shared practical advice for consumers navigating this uncertain financial landscape: “For now, the best action consumers can take is to shop around and get the best savings or mortgage deal available. If your fixed deal is coming to an end, consider how long you may want to fix your rate for and the overall cost of the mortgage. Sometimes, a longer fixed-term will have a lower rate but will cost you more in the long run."