Mortgage rates drop but savers suffer

Category: Money
Date: 3/10/2010

Mortgage rates have been tumbling but savers have been suffering, according to new research from Moneyfacts.co.uk.

The average 2 year fixed rate mortgage has dropped from 5.11% in November last year to 4.74% today.

However, in order to fund the cuts, providers have been reducing savings rates too.

The largest rate reductions have been seen on fixed rate bonds, while a number of easy access deals have also been withdrawn.

The only exception to the trend is ISAs, with rates having steadily risen as providers battle to attract savers' tax-free allowance, with the end of the tax year drawing near.

The average fixed rate ISA seen its rate rise by 0.40% since November to stand at 5.00% today, while variable rate ISAs have jumped 0.25% to 3.50%.

"Providers have moved their focus to the more profitable mortgage market, with savings rates being reduced to fund mortgage cuts," said Michelle Slade, spokesperson for Moneyfacts.co.uk.

"Mortgage borrowers will of course be celebrating, but it is savers who are paying the price for homeowners' good fortune.

"The only real bright spot on the horizon are the ISA rates which are currently available.

"However, it might be wise to move quickly, as when the ISA season comes to an end next month, rates are likely to fall again."

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