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Consumers have been warned to ensure their finances are in order as a host of banks and building societies prepare to change rates on mortgages and savings accounts.
For those who are homeowners, savers or both, those changes are not in a positive direction. Several mortgage providers are shifting rates upwards, while headline rates on savings accounts are falling - with one notable exception.
That’s despite the Bank of England (BoE) not altering the base rate on Thursday, after interest rates were cut to 3.75 per cent in December.
Mortgage rates lifted
While not every mortgage product is affected from each of the lenders, several important institutions have signalled changes upwards this week.
Barclays (up to 0.15 per cent higher), Nationwide (up to 0.19 per cent) and NatWest (up to 0.24 per cent) have lifted mortgage rates for both new and renewing clients, while Virgin Money, HSBC and Santander have also moved higher.
Naturally, anybody already on a fixed term deal will not be affected, while tracker mortgages shouldn’t be hit by a hold vote from the BoE.
Alpa Bhakta, CEO of Butterfield Mortgages, pointed out: “We should not overlook the fact that the market is in a healthier position than 12 months ago and the potential for future rate cuts remains.”
There are still plenty of sub-4 per cent deals around, but several industry experts have suggested that if you are due for a new one, you should lock in the best deals you can get while they are still on the market. Plenty have now been withdrawn or changed.
On the plus side, more lenders are raising affordability limits with NatWest the latest to move to offer up to six times the income for new applicants. Individuals need to be earning £75,000, or £100,000 for a couple, to benefit from the best rates.
Savings rates down
Meanwhile, three banks or building societies are set to cut savings rates between today - Thursday - and next week, totalling at least 19 account types.
Yorkshire Building Society, Nationwide and NS&I are all cutting their rates, including easy access savers, certain ISAs and children’s saver accounts, shows research from comparison site Finder.
For March, RBS, the Co-Op Bank and Barclays have all already signalled they will cut some rates too and more could follow.
Kate Steere, personal finance expert at Finder, urged savers to ensure their bank offers the best rates - or else move their money elsewhere.
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“Savers shouldn’t settle for a worse deal out of a sense of loyalty to their current provider. With the average UK savings (£19,214), if you kept your savings pot with one of the new, lower rates, such as an account earning 1.25 per cent, you’d end up with just £240 after a year. Meanwhile, a market-leading rate of 4.5 per cent from Chase would mean £864 in interest, a significant difference of over £600.”
Rachel Springall, finance expert at Moneyfactscompare.co.uk, said: “Economists do not predict another Bank of England base rate cut until March or April, citing a weakening labour market and sticky inflation as the cause for a more cautious approach to rate setting.
“Any delay in further interest rate cuts by the Bank of England is irrelevant; there has already been irreversible damage done to the savings market over the last 12 months. As inflation remains well above target, real returns on cash savings are weak and this can lead to a dangerous attitude of apathy.”
Cash ISA boost
There is, however, one account going the other way this week - the cash ISA from Moneybox is offering 4.32 per cent. That makes it one of the top rates around right now, behind Trading 212’s 4.4 per cent and ahead of Plum’s 4.3 per cent.
As is often the case with cash ISAs these days, there are stipulations attached to Moneybox’s new offer. The rate includes a 0.87 per cent bonus which is active for 12 months, and the high rate only holds if you make a maximum of three withdrawals a year from it.
If you might be making more than three withdrawals, you have the option of Moneybox’s open access version of the ISA, which offers 4 per cent interest (including a 0.75 per cent bonus for a year) but has no limits on when you take cash out or how often.
Of course you can also look for other savings accounts offering above 4 per cent, depending on your expected needs and the amount you want to save, as well as your current ISA position relative to the £20,000 per year limit and how much interest you are likely to earn - therefore whether it would be taxed or not.
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