Fixed rate fever continues for savers, but a miserable month for mortgages

Mark Hicks, Head of Active Savings, and Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, comment on the Bank of England’s publication of the Money and Credit report for August 2023, showing fixed rate fever continues for savers, but a miserable month for mortgages.

Key points from publications:
    • The raid on easy access savings continued in August – withdrawing £6 billion from accounts paying no interest (including current accounts) and £6.4 billion from accounts paying interest.
    • We paid £8.3 billion into fixed rate savings accounts.
    • We paid £0.4 billion into NS&I, so overall the amount in savings didn’t change. Over the past six months savings have risen an average of £1.5 billion a month.
    • Fixed rate deals rose 18 basis points to 5.12% on average and easy access rates rose to 1.83%.
Mortgages:
    • Mortgage approvals fell to 45,400 in August – the lowest in six months.
    • The average rate on new mortgages rose 16 basis points, to 4.82%.
Mark Hicks says:

“Fixed rate fever continued in August, as £8.3 billion rushed into deals at the peak of the market.

“It’s a pattern we have seen reflected in a real appetite for fixes among Active Savings clients, who have grasped the opportunity to snap up a deal.

“However, there are more worrying signs emerging from the easy access market.

“Rates have backed off very slightly in the months since, but not dramatically so.

“There are still some really strong deals around, so the appetite for fixed rates hasn’t been sated yet.

“However, we’re not expecting rates to rise from here, so if you were waiting to see if deals went higher before fixing, then it’s worth securing one sooner rather than later.

“The raid on easy access has slackened slightly, but still £12.4 billion was pulled from accounts.

“Some of this may have found its way into fixed rate deals.

“However, at this stage in the cost-of-living crisis, there’s a real risk people are being forced to dip into their savings to make ends meet.”

Sarah Coles says:

“It was a miserable month for mortgages, as rates hit a peak, and buyers bailed out of the market.

“Approvals were at a six-month low as the average rate on new mortgages rose 16 basis points, to 4.82% on the back of concerns that inflation wasn’t falling as fast as expected.

“Things aren’t quite as dire as they were in the aftermath of the mini-Budget, but that’s an incredibly low bar.

“We’re seeing every sign that higher mortgage rates effectively killed demand during the month.

“The Nationwide figures out earlier today showed that this had a knock-on impact on house prices, which fell faster than at any time since the aftermath of the financial crisis.

“The good news is that this was the peak for mortgage rates, and they have fallen in the months since.

“It remains to be seen whether demand has bounced back, or whether the fact that rates are still higher than the spring means any recovery in buyer demand is likely to remain lacklustre as the housing market staggers towards the end of the year.”

 

Kindly shared by Hargreaves Lansdown