Mortgage rates are higher today than six months ago - despite two Bank of England rate cuts

Homeowners have seen mortgage rates rise since October despite the Bank of England cutting the base rate twice, new exclusive analysis has revealed.

Meanwhile, savers have seen average rates slashed at 2.4 times the pace of the base rate cuts during that time.

Between October 2024 and now, the base rate has been cut twice by a total of 0.5 percentage points, going from 5 per cent to 4.5 per cent.

Often, both mortgage and savings rates fall alongside the base rate because the cost of borrowing for banks reduces.

But analysis by the finance comparison site Finder revealed a stark difference between savings and mortgage rates following the recent central bank changes.

Despite the base rate falling, mortgage rates have actually risen since October, according to Finder.

The average rate on a two-year fixed mortgage with a 25 per cent deposit rose from 4.41 per cent in October to 4.54 per cent in March, peaking at 4.66 per cent in February.

Similarly, the average five-year fixed rate mortgage on the same terms has jumped from 4.06 per cent to 4.32 per cent.

Mortgage rates have been falling in the aftermath of Donald Trump's tariff announcements with an expectation that more interest rate cuts are now coming.

However, the lowest fixed mortgage deals are still higher than they were in October last year.

At the start of October, one month before the Bank made its second cut from 5 to 4.75 per cent, the lowest five-year fixed rate mortgage was 3.68 per cent and the lowest two-year fix was 3.84 per cent.

Fast forward to today, the lowest five-year fix is 3.99 per cent and the lowest two-year fix is 3.91 per cent.

While homeowners have seen mortgage rates rise since October, savers have seen rates fall further than expected, according to Finder.

If savings rates had dropped a similar amount relative to the base rate change, this would mean the average variable cash Isa rate should have fallen from 2.58 per cent to 2.3 per cent.

In reality, the average variable cash Isa dropped by around a third, from 2.58 per cent to 1.96 per cent, according to Finder's analysis.

This is roughly three times the base rate reduction, leaving savers significantly worse off.

Many savers prefer the flexibility of easy-access variable deals, which are much more at risk to base rate cuts.

Those who have stuck to fixed-rate savings accounts will have done much better over the past six months.

The best one-year fixed rate cash Isa is now paying 4.35 per cent compared to 4.56 per cent back in October.

Kate Steere, savings and mortgages expert at Finder, said: 'Homeowners could reasonably expect lower mortgage rates to follow base rate cuts, but instead, they’ve faced rising costs in recent months.'

'At the same time, savers have seen average rates fall by far more than the base rate itself. The result? Consumers are losing out both ways.

'With Trump’s recent tariff announcement and subsequent reports of mortgage rates finally dropping, many will be hoping to see a reduction in their monthly payments after months of bad news.

'But this is too little, too late for some consumers. For now, the best action consumers can take is to shop around and get the best savings or mortgage deal available.

'If your fixed deal is coming to an end, consider how long you may want to fix your rate for and the overall cost of the mortgage.'

While fixed rate mortgages are currently higher than they were when base rate was at 5 per cent, most borrowers won't have been impacted by this.

The vast majority of households are on fixed rates, which means they are protected from mortgage rate fluctuations until their deal ends.

However, some people will have seen their mortgage rate fall.

A small minority have tracker mortgages, which essentially track the Bank of England's base rate plus a certain percentage.

These borrowers will almost certainly have seen their mortgage rate improve, and thus their monthly repayments go down as a result of base rate cuts.

A large number of people on their lender's standard variable rates (SVRs) should also have seen improvements thanks to base rate cuts.

SVRs are the rates people revert to once their initial deal ends, if they do not switch to a new product.

The average SVR has fallen from 7.96 per cent in October last year to 7.6 per cent, according to Moneyfacts.

While that's less than the 0.5 percentage points of base rate cuts it means the typical borrower on an SVR should have seen some improvement.

Ultimately, borrowers need to worry less about what the Bank of England is doing with the base rate and more about what money markets are suggesting the future holds for interest rates.

Fixed-rate mortgage pricing is largely based on Sonia swap rates - the inter-bank lending rate, based on future interest rate expectations.

When Sonia swaps rise sufficiently it often results in fixed mortgage rates going up, and vice versa when they fall.

'Mortgage pricing is much more closely tied to swap rates than to the Bank of England base rate,' says Rachael Hunnisett, director of mortgage distribution at longer-term fixed rate lender April Mortgages.

'Swap rates take into account not just expectations for future base rate movements, but also a wide range of macroeconomic and geopolitical factors.

'So, assuming that a cut to the base rate will automatically lead to cheaper mortgage deals is an oversimplification.

'We’ve seen plenty of recent examples where the Bank has reduced the base rate, but mortgage pricing hasn’t followed suit - and in some cases, has even gone up.

'That’s often due to rising inflation, economic uncertainty, or global market turbulence, all of which feed into how lenders price their products.

'The reality is that mortgage rates move in response to market sentiment and broader financial conditions - not just what’s happening at Threadneedle Street.

'And right now, with so much uncertainty in the global outlook, lenders are proceeding with caution.

'Until there’s a clearer picture on inflation, growth, and international stability, we’re unlikely to see mortgage rates shift dramatically in response to base rate cuts alone.'

Mortgage rates have risen substantially over recent years, meaning that those remortgaging or buying a home face higher costs.

That makes it even more important to search out the best possible rate for you and get good mortgage advice.

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