‘Higher for longer’ as people across UK hit with extra £1,700 charge | Personal Finance | Finance

A “higher for longer” outlook could boost returns on savings, but there is a significant catch. According to fresh analysis from Moneyfactscompare.co.uk, new borrowers are still confronting rising mortgage costs of up to £1,700.

The latest findings from the financial product price comparison firm revealed that, since the previous inflation announcement before this week’s news that prices were climbing by 3.3% in an upward trend since the onset of the latest Middle East conflict, the Moneyfacts Average Mortgage rate had increased from 5.50% to 5.71%.

Meanwhile, the average two-year fixed rate had climbed from 5.56% to 5.83%, while the average five-year fixed rate rose from 5.54% to 5.73%.

The analysts noted that borrowers were still facing a yearly increase of over £1,700 on an average two-year fix, or over £1,300 on the average five-year fix, based on a typical £250,000 mortgage over 25 years since the Iran conflict commenced, despite rate hikes showing signs of stabilising. Some of the biggest lenders, including HSBC, Lloyds Bank Halifax and Barclays Mortgage, had reduced their fixed rate mortgages by up to 0.37% over the past week.

Caitlyn Eastell, personal finance analyst at Moneyfactscompare.co.uk, said: “Rising mortgage rates seem to have stabilised as average rates have held firm in recent weeks. However, borrowers could still be facing a £1,700 yearly increase on a two-year fix or £1,300 on a five-year fix since the conflict in Iran began.

“Swap rates have edged closer to 4% and this has spurred a handful of the biggest lenders to start introducing cuts. Markets are still sensitive to sudden shifts, so it remains to be seen how long this will be the case. Homebuyers will need to evaluate their affordability because rates could stay higher for longer as the Bank of England tries to bring inflation back towards its target.”

Savings boost ‘for longer’

The experts noted that the Consumer Price Index (CPI) climbed to 3.3% during March, up from 3% in February. The Bank of England’s projection rate for inflation during Q1 2027 stands at 1.7%.

The Moneyfacts Average Savings Rate presently sits at 3.46%, exceeding inflation, meaning savers can achieve genuine returns on their cash, it stated, though shopping around for the most competitive rates remained crucial.

It revealed there were currently 1,582 savings accounts beating inflation – 139 easy access, 131 notice accounts, 138 variable rate ISAs, 387 fixed rate ISAs and 787 fixed rate bonds. In April 2025, there were 1,608 deals capable of beating CPI which stood at 2.6% (March 2025 CPI) and in April 2024, there were 1,364 deals that could surpass CPI which was at 3.2% (March 2024 CPI).

Caitlyn said: “The fading rate environment attitude at the start of the year has U-turned as fresh inflation shocks continue to shift base rate expectations. By Q3, inflation is expected to hit 3.5%. The last time it was around this figure there were 1,224 deals that could beat CPI but based on today’s rates there would be over 200 more.

“The ‘higher for longer’ stance could temporarily push this number even higher, giving savers unrivalled choice, however, providers may not be able to maintain these competitive margins as markets remain volatile. During times of uncertainty, some savers may place higher value on flexibility.

“Easy access accounts can be useful to help manage monthly volatility, giving savers the freedom to respond to unexpected costs. Today the top easy access account edges ahead of even the top fixed bonds, on £10,000 that equates to a small £5 yearly advantage, but this can quickly grow on larger sums. However, savers not willing to bet on variable rates remaining elevated may be willing to sacrifice the higher rates for guaranteed returns.

“Savers face a tricky balancing act. While they may be able to enjoy more competitive returns in the short-term, inflation will quickly catch up, eroding their hard-earned cash. In any case it’s crucial savers shop around for deals that pay over 3.3% to ensure they aren’t left out of pocket.”

Moneyfacts clarified that its savings product figures encompassed deals available to UK residents — including easy access accounts, notice accounts, fixed rate bonds, variable Cash ISAs and fixed Cash ISAs — while excluding regular savers, children’s savers, variable rate fixed term bonds or ISAs, JISAs and LISAs, based on a £10,000 deposit at gross rates. The financial data provider noted that higher rates may be obtainable for alternative deposit amounts.