As the second half of this year approaches, mortgage holders who are nearing the end of their fixed rate deals can expect an increase of approximately £220 in their monthly payments. Mark Harris, CEO of mortgage broker SPF Private Clients, warns that borrowers transitioning from cheap fixes will face a significant payment shock.
The Bank of England predicts a modest decline in house prices in the coming months, as more landlords sell their properties due to the surge in mortgage costs. While rising interest rates may pose challenges for borrowers, savers can anticipate improved returns.
Following the Bank’s announcement, Nationwide and HSBC were among the first providers to enhance their savings offers. Nationwide’s “Triple Access Online” cash ISA now offers an annual interest rate of 4.25%, up from 3.5%, allowing savers to invest up to £20,000 tax-free annually. HSBC will also increase rates on its instant-access “Premier” savings accounts by 0.25 percentage points next week, reaching 2.25%, with rates rising to 2% on certain other accounts.
The City regulator has previously expressed concerns about high street banks not fully passing on the benefits of higher rates to savers. However, Bank of England Governor Andrew Bailey states that this is now changing, as banks have substantially raised savings rates following the last interest rate hike. Figures from MoneyFacts indicate that the average interest rate on instant access accounts rose from 2.35% to 2.8% between June and July, a 0.45 percentage point increase that reflects the Bank’s 0.5 percentage point move in June.
By comparison, when the Monetary Policy Committee increased the base rate from 0.1% in December 2021 to 1.25% in June 2022, savers witnessed only a slight rise in returns, going from 0.1% to 0.27% over the same period, according to Bank data. Threadneedle Street officials also note that pay rises have exceeded expectations, with a growing risk of a wage-price spiral.
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