Higher interest rates undercut savings available on mortgages

Rising interest rates have seen mortgage lenders squeeze the best deals out of the housing market.

According to Moneyextra.com the total annual savings now available by replacing near-worst with near-best products across a range of financial services is £4,327.78. That’s down £350.82 on the savings available three months ago.

Mortgages account for all and more of the total fall in potential savings as the most competitive fixed rate deals have been withdrawn. The annual savings now available on the average mortgage amount to £2,832, down £355.80. Personal loan rates have also been squeezed in the last three months and term assurance has become marginally more expensive.

However, on the plus side, higher interest rates have also meant there are better bargains to be had for those looking to save money. The best performing deposit accounts, current accounts and cash Individual Savings Accounts all reflect increased interest rates and offer better returns than they did in the first quarter of the year.

Robin Amlôt of Moneyextra.com commented, “It’s hardly surprising mortgage deals are being squeezed but there are still bargains to be had. With the prospect of higher interest rates still to come, anybody on a standard variable mortgage rate really should be shopping around for a better deal.”

Making sure you have the right mortgage is the cornerstone of a fitter, fatter wallet, with the potential savings from the right decision here accounting for 65 per cent of the total savings to be made.

Those with savings could find themselves more than 10 times better off! With £5,000 in an instant access savings account, the difference between near worst and near best accounts is £265 in interest – more than 10 times the £25 being offered at the bottom end of the scale.

Elsewhere, Moneyextra.com’s figures also show that picking the right cash ISA could add more than 50% to the amount of interest you earn. The difference between best and worst for a £3,000 instant access ISA is £62.70, well over half the interest being offered by the poorest performer.