Fixed Rate Mortgage Deals Becoming Slightly Cheaper

As interest rates have increased, individuals are increasingly looking into their financial options, finding fixed rate mortgages and savings deals particularly appealing. While variable rate deals move in line with the Bank of England’s rate increases, fixed rate deals are influenced by market expectations of future interest rates, resulting in a small fall in the cost of fixed rate mortgages.

Key Points:

  • Mortgage rates have been climbing but are expected to drop as lenders pass on savings from an anticipated fall in long term Bank of England interest rates.
  • The rise of interest rates is prompting savers and homeowners to consider fixing rates for mortgages and savings.
  • Variable rate deals will move in line with the Bank of England’s rate increases, while fixed rate deals are influenced by market expectations of future interest rates.
  • Savers are capitalizing on shorter-term fixed rates, with the majority of new savings going into fixed rate accounts.
  • Annuities are making a comeback, offering higher incomes due to rising interest rates.

Fixed Rate Mortgage Deals

Over the last few years, the average two-year fixed rate mortgage has been on the rise, reaching 6.86% in the middle of June. However, following unexpected inflation figures, this rate has slightly dropped to 6.83%. Lenders like Barclays, TSB, HSBC, and Nationwide have taken the opportunity to cut their rates, which indicates that average rates may further decline in the near future.

Although this won’t lead to a return of remarkably low rates, it will make a substantial difference to re-mortgagers and potential homebuyers who have been priced out of the market. For those who have been lingering on variable rates, now might be the good time to look for good mortgage deals and fix their mortgages, as rates have declined slightly compared and may have peaked according to Sarah Coles, head of personal finance at Hargreaves Lansdown (HL).


Fixed-rate savings have been gradually increasing, with the average one-year fix rising from 4.17% at the end of May to 5.15%. However, at the competitive end of the market, rates have settled just above 6%. This indicates that the peak may have been reached, and we might not see much higher rates in the near future.

This change in fixed-rate savings has not gone unnoticed by savers. On HL’s cash savings platform, Active Savings, 74% of new savings went into fixed rate accounts in July, up from 66% in June. The trend also reveals that savers are preferring shorter-term fixed rates, which have been particularly attractive due to the high interest rates that they offer. The prospect of a recession emphasises the importance of finding the best savings rates available.

A loving retired couple on a beach


Annuities have been the poor relation of retirement planning for some time, but they are regaining prominence as they are now offer higher income rates. For example, a 65-year-old with a £100,000 pension can now obtain an income of up to £7,210 per year, compared to just £4,946 two years ago.

Rising interest rates are a significant factor contributing to the increase in annuity rates. With the Bank of England’s decision to hike rates, annuity rates have already started to increase. Although there is no certainty that we will see further increases following another boost, it remains a strong possibility. Additionally, with interest rates expected to remain elevated for some time, retirees seeking guaranteed income are closely monitoring the annuity market for opportunities.

Helen Morrissey, head of retirement analysis at Hargreaves Lansdown stated that “Apart from a brief period last Autumn when the mini-Budget sent gilt yields soaring you haven’t been able to get incomes like this from an annuity for well over a decade. When you compare this to the £4,946 the same person would have got just two years ago you can see why people are taking a closer look.”

What is an Annuity

An annuity is a financial product that provides a regular income stream to an individual over a specific period or for the rest of their life. It is often used as a retirement income option, offering a sense of security by guaranteeing regular payments.

Annuities are typically purchased through insurance companies or financial institutions, and they can be funded either with a lump sum or through periodic contributions. The amount of income received from an annuity depends on various factors, such as the initial investment, prevailing interest rates, and the chosen annuity type.

Annuities come in different forms, including fixed annuities, where payments remain constant, and variable annuities, which offer payments based on underlying investment performance. The choice of annuity depends on individual financial goals and risk tolerance. Overall, annuities serve as an important tool for individuals looking to secure a reliable income during their retirement years.

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