Rising Mortgage Costs: A Unique Opportunity for Fixed Deposit Savers

If you’ve been paying attention to the news lately, you’ve probably noticed a lot of buzz about rising mortgage rates in the UK, and If you're trying to buy or refinance a home, it feels like the market is anything but friendly. Even though the Bank of England (BOE) has lowered its base rate, mortgage rates seem to keep climbing, and it’s tough not to get frustrated. But here’s the twist: this increase in mortgage rates might actually benefit people who are saving rather than borrowing.

The Mortgage Rate Paradox: Why It’s Good News for Savers

So, here’s the deal. Mortgage rates are going up, even though the BOE base rate has been cut in recent months—twice in 2024 alone, in August and November, bringing it down to 4.75%​. You might think that mortgage rates should drop in response to this, but that’s not happening. In fact, in November 2024, the average two-year fixed mortgage rate was still a hefty 5.39%—significantly higher than it was just a few years ago, when it was around 2.17%​

Now, if you’re feeling the pain of rising mortgage rates, you’re not alone. But here’s the silver lining: as mortgage rates rise, banks typically adjust their savings and fixed deposit rates to attract depositors. This means that while borrowing is getting more expensive, savers can take advantage of higher interest rates on fixed deposits and secure more competitive returns.

Why Fixed Deposits Are a Smart Choice Right Now

When mortgage rates go up, it’s easy to get stressed out about the cost of borrowing, especially if you’ve been considering buying a home. But for those of us who are saving rather than borrowing, these rising rates can be a blessing in disguise. Here’s why fixed deposits are looking so attractive right now:

• Predictability is Comforting: Fixed deposits offer guaranteed returns, which is a huge relief in today’s uncertain financial climate. While other investments might make you nervous with their unpredictable swings, fixed deposits allow you to rest easy, knowing exactly what you’ll get at the end of your term.
• No Stress Over Market Swings: We’ve all seen how volatile the stock market can be, especially in times of economic uncertainty. With mortgage rates creeping up and inflation causing concern, having your money locked in a fixed deposit offers peace of mind. You won’t have to worry about sudden market drops or fluctuations.
• Reliable Income During Uncertain Times: As mortgage costs keep rising, many of us are rethinking where to park our money. Fixed deposits give you that steady, predictable income stream you can count on. The BOE, while cautiously lowering rates, still faces inflation pressure, making it unlikely that rates will drop significantly anytime soon​. Locking your funds in a fixed deposit now could be one of the wisest moves you can make.

How Fixed Deposit Solutions Can Help You Navigate Today’s Financial Climate:

With mortgage rates going through the roof and the future still looking a little unpredictable, many of us are looking for ways to secure our savings and ensure stable returns. Fixed deposits are an excellent option for anyone wanting to avoid the risks of market volatility while still earning reliable returns.

Whether you're new to fixed deposits or looking to diversify your savings, we’re happy to discuss the options that will work best for you.

References

Bank of England. (2024). Bank rate history. Bank of England.
www.bankofengland.co.uk

BBC. (2024, November 18). Mortgage rates hit new highs despite base rate cuts. BBC News.
www.bbc.co.uk

The Guardian. (2024, November 18). UK mortgage rates creep up as brokers warn of possible further pain. The Guardian. www.theguardian.com

Disclaimer: This information is for educational purposes only and does not constitute financial advice. We encourage readers to consult a financial adviser for personalised advice tailored to their unique circumstances and tax considerations.