Savers could benefit from a prolonged period of higher returns, but borrowers are facing a stark warning of rising mortgage costs up to £1,700 annually, according to new analysis from Moneyfactscompare.co.uk.
Mortgage Rates on the Rise
The financial product comparison company reported that since the previous inflation announcement to this week's news of prices rising by 3.3%—an upward trend since the start of the latest Middle East conflict—the Moneyfacts Average Mortgage rate has increased from 5.50% to 5.71%. The average two-year fixed rate rose from 5.56% to 5.83%, while the average five-year fixed rate climbed from 5.54% to 5.73%.
Analysts noted that borrowers are still facing an over £1,700 yearly increase on an average two-year fix or over £1,300 on the average five-year fix for a typical £250,000 mortgage over 25 years since the Iran conflict began, despite rate hikes stabilising. Some major lenders, including HSBC, Lloyds Bank, Halifax, and Barclays Mortgage, have reduced their fixed rate mortgages by up to 0.37% in the past week.
Expert Insight
Caitlyn Eastell, personal finance analyst at Moneyfactscompare.co.uk, commented: “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.”
Savings Boost 'for Longer'
The experts explained that the Consumer Price Index (CPI) rose to 3.3% in March, up from 3% in February. The Bank of England's projection 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 achieve real returns on their cash. However, it remains crucial to shop around for the best rates.
Currently, there are 1,582 savings accounts that beat inflation, including 139 easy access accounts, 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 (then at 2.6%), and in April 2024, there were 1,364 deals that could beat CPI (at 3.2%).
Savers' Balancing Act
Caitlyn added: “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 include deals available to UK residents—easy access accounts, notice accounts, fixed rate bonds, variable Cash ISAs, and fixed Cash ISAs—excluding regular savers, children’s savers, variable rate fixed term bonds or ISAs, JISAs, and LISAs, based on a £10,000 deposit at gross rates. Higher rates may be available for other deposit levels.
