September was a golden month for mortgages and a tin pot one for savings
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, comments on Bank of England effective interest rates and money and credit report, showing September golden month for mortgages and tin pot one for savings.
Key findings from publications:
- The average easy access savings rate stuck at a record low 0.09%, while the average on new fixed accounts rose very fractionally from a historic low of 0.29% to 0.31%.
- The average rate on new mortgages fell again to 1.78%.
- We borrowed £9.5 billion more on mortgages in September, bouncing back from £4.4 billion in August. This is above the 12-month average to June, but still well below June’s record of £17.1 billion.
- We borrowed another £200 million in consumer credit. This came from borrowing £600 million more on credit cards and repaying £400 million of other debt like car finance and personal loans. Credit card debt is still down 5.5% in a year.
- New savings dropped to £9.4 billion, but that’s still more than the average of £8.9 billion between April and August this year and double the pre-pandemic average of £4.7 billion.
Sarah Coles said:
“September was a golden month for mortgage borrowers, and a rusty old tin pot one for savers.”
On savers:
“Easy access rates stuck at historic lows of 0.09%, and fixed savings rose only fractionally from theirs. Most people continued to make 0.01% in a typical high street account, with little hope that anything would change.
“However, inflation in October has altered the picture significantly. We’re now expecting rate rises from the Bank of England possibly as early as November, which has started to see some fixed rates creep up further. You can now get 1.45% over one year from Al Rayan Bank and 1.76% over two years.
“There will be plenty of people who are wary of fixing at a time of rising rates, who want to wait and see what happens when rates rise, and fix when there’s something more attractive on offer. This is risky, because we can’t be certain when the Bank will raise rates, or whether savings providers will pass it on. It’s also impossible to tell when you’ve hit the top, because rates will rise gradually, so you could find yourself havering for months. In the meantime, if your money is earning 0.01%, you’ll be missing out on better rates right now.
“You could consider fixing now for a shorter period, or if you’re determined to wait and see, it’s worth considering exactly what it will take to make you fix, so you know when that moment arrives, and in the interim, move into a competitive easy access account.”
On mortgages:
“Hindsight is both perfect, and useless, because it’s only in hindsight that we can see September may have been the ideal moment to remortgage. Fortunately, even if your timing wasn’t perfect, you can still get a great deal.
“The average rate on new mortgages fell again to 1.78% in September. Since then, anticipation of imminent Bank of England rate rises has increased the cost borrowing for banks, and that has started to feed into higher interest rates.
“However, we’re still near the bottom. You can still get a five-year fixed rate mortgage, for 60% of the value of your home, for less than 1%, and a two-year fix for 0.89%, so there are still great deals around for remortgagers looking to lock in a low rate.
“These deals won’t be around forever though. At a time of rising rates, the only way is up for mortgages, so it’s worth remortgaging sooner rather than later. If you’re on a fixed rate deal, but within six months of the end of it, you don’t have to wait: you can apply for a new mortgage, and secure a cheap deal ready for when your current one expires.”
Kindly shared by Hargreaves Lansdown
Main photo courtesy of Pixabay
