As we enter the last month of 2018, the latest research from Moneyfacts.co.uk
can reveal the winners and losers affected by this year's interest rate rises, and what this may mean for savers and mortgage-holders moving into 2019.
Savers appear to be the clear winners, with the rates of several cash savings vehicles rising to their highest levels of 2018 in December – and some hitting multi-year highs – with a particular jump in easy access accounts and short-term fixed bonds.
Mortgage customers on the other hand seem to have lost out, with the base rate rise pushing the average standard variable rate (SVR) not just to its highest point this year, but to its highest level seen since 2009. Fixed mortgage rates are also on the rise, but lenders are still trying to entice borrowers, not just on rate, but also by revisiting their incentive packages.
As you can see from the table above, savings rates have come a long way in the last year, with only longer-term deals seeing a slight downturn in the last quarter. "This has been largely fuelled by challenger bank competition and the effects of the Bank of England's base rate rise," said Rachel Springall, finance expert at Moneyfacts.co.uk. "As a result, savers are likely to see better returns on offer in the Best Buys than at the start of 2018, which is great news."
For example, at the beginning of 2018, the best return on a one-year bond came from Al Rayan Bank, paying an expected profit rate of 1.85%. Today, savers can find 10 top deals paying 2% or more - including this one-year bond from Investec, and another from BLME - which was unheard of just a few months ago.
This isn't the case everywhere – over the past quarter, the average five-year fixed bond rate has fallen, down from 2.21% in September to 2.15% today – but overall, things are looking up in the savings market. There's no evidence that this will change any time soon, either, particularly in certain areas.
"Speed is still a key area for savers to consider, and in 2018 we saw limited edition Best Buys come and go within a matter of weeks," said Rachel. "Moving into 2019, it will be no surprise to see more of these accounts surface as providers gauge demand, particularly on easy access deals.
"As it stands, there is a lot of speculation as to whether interest rates will rise further in 2019 and beyond, so savers might be cautious and invest in shorter-term offerings instead, such as easy access accounts or one-year fixed bonds. This speculation may also increase demand for these products, and right now providers are upping rates to compete and entice prospective savers. This means savers would be wise to shake off any apathy they have and revisit the Best Buys for a better deal."
"The cost of mortgages does appear to be on the rise as a whole, fuelled by the base rate rise in August, but as we have seen in the last month, lenders are still heavily invested in attracting new borrowers and retaining those who may be coming off a deal at a quieter period of the year. Therefore, providers have revisited their incentive packages as a way to entice prospective borrowers, such as by offering cashback or creating a bundle of cost-saving incentives upfront."
Not only that, but borrowers who are looking to remortgage will find that motivation to switch from an SVR has never been greater, with the average SVR a monstrous 4.90%. If they switched to a typical two-year mortgage instead, which has a rate of 2.51%, they could save over £3,000 in the first year of their mortgage (based on a £200,000 mortgage over a 25-year term on a repayment basis).
"As we move into next year, borrowers may well be cautious to move home or buy their first property due to economic uncertainties, but those who are looking to save some cash on their mortgage would be wise to revisit the Best Buys to fix into a better rate or package before rates rise further still," concluded Rachel.
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