Market tracker: Where next for savings and loans?

Piggy question mark

Though the Bank of England held its rates in September after cutting them to new lows in August, markets are hinting they haven’t bottomed out yet. Some commentators think Mr Carney’s next move will be to cut rates further, potentially as soon as November.

No savings best buys have improved in the last month, and most have got worse. Even the loss-leading Help to Buy accounts are being squeezed. Virgin’s previous best-buy account has retreated to the middle of the pack, so Barclays has the best rate going, for now at least.

The Bank of England’s rate trackers (below) show it’s been a bad month for savers across the board, with average rates on instant access accounts now just 0.3%, a whisker above the base rate:

(Click on the graph below to enlarge):


Of course, the upside of ultra-low rates are that mortgage costs are being pushed to new lows.

Standard variable rates (SVRs) dipped sharply in August as lenders passed on the base rate cut to borrowers. Mortgage rates are falling across the board and the best deals are for new customers, so don’t settle for a slightly cheaper SVR. Most people who’ve let their fixed-rate terms expire could save £100s a month by switching to the best deal.

One tricky question for people looking to remortgage is whether to go for a fixed rate deal, or chance a variable rate mortgage. Fixing will protect you against a rate rise, but could mean you miss out if rates fall further.

Current mortgage rates suggest banks and building societies expect the Bank of England to drive the cost of borrowing down further in the months to come. Usually, borrowers need to pay a slight premium to fix their mortgage repayments, but according to the Bank of England (see table above), it’s now cheaper to fix than stick with a 25% deposit, further suggesting the only way is down for the base rate.


The unsecured lending market – that’s credit cards and personal loans – hasn’t been so forthcoming in passing on cheaper deals to borrowers. According to the Bank of England's data shown in the table below, rates on £10,000 loans are slightly cheaper, though smaller loans are considerably more expensive than they were a year ago.


Published: 21 September 2016
Last updated: 21 September 2016

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