Savers are struggling with falling rates of return since the bank rate has been held at 5.25%

New market analysis by peer-to-peer real estate investment platform, easyMoney, reveals that over the eight months since the bank rate has been held at 5.25%, mortgages may have become slightly more affordable but any benefit has been largely negated by saving becoming less rewarding.

easyMoney has analysed the changing interest rates for six different types of mortgage loans, as well as the changing interest rates for six different types of savings accounts, across the eight months since the Bank of England has held the bank rate at 5.25% (September 2023 – April 2024)*.

Mortgage affordability on the up

The research reveals that over the eight months, all of the types of mortgage loan analysed by easyMoney have become more affordable.

The biggest rate drop has been recorded for a 2-year 75% LTV fixed-rate buy-to-let mortgage, the interest on which has fallen by -1.16% between September 2023 (5.99%) and April 2024 (4.83%).

While this rate drop is beneficial only to landlords and buy-to-let investors, the second-largest rate drop directly benefits everyday homebuyers.

The interest paid on a 3-year 75% LTV fixed-rate owner occupied mortgage has fallen by -1.05%, down from 5.79% in September 2023 to 4.74% in April 2024.

These mortgage rate reductions are great news for buyers and show hints of promise about the levels of affordability coming down the line as the economy becomes more settled and the Bank of England potentially starts to reduce its rate.

Savers see rates offered on the decline

However, easyMoney’s analysis of the changing interest rates for six different savings accounts over the same eight-month period reveals that things have gotten tougher for savers.

This is because the level of interest savers are benefitting from across five of the six saving methods analysed has declined since bank rates have been held at 5.25%.

The interest on a 2-year fixed-rate bond has fallen by -1.38% since September 2023 to currently sit at 4.12%.

The interest on a 2-year fixed-rate Cash ISA has dropped by -1.19% since September 2023’s figure of 5.39%. And interest rates have also fallen for 1-year fixed-rate bonds (-0.94%), 1-year fixed-rate Cash ISAs (-0.90%), and Cash ISA variable-rate including unconditional bonuses (-0.47%).

The only saving method to have seen interest rates climb since September 2023 is Instant Access Saving including unconditional bonuses which has seen the figure increase by 0.03%. However, even this is on the decline having peaked at 2.82% in January of this year.

The superior rates of innovative finance ISAs

In contrast to these declining interest rates for saving methods, Innovative Finance ISAs (IFISAs) have continued to provide strong rates of return regardless of wider economic frustrations.

For example, easyMoney’s award-winning IFISA product offers target rates having last increased in September 2023 and remained as is ever since.

The target rate for their Premium offering stands at 5.53%, and their Premium Plus rate rises to 6.52%.

For very wealthy and professional investors, the IFISA rates get even higher.

easyMoney’s High Net Worth target rate is 7.51%, while professional investors are looking at returns of up to 10%.

Jason Ferrando, CEO of easyMoney said, “A static bank rate suggests that recent economic struggles are somewhat easing, but also tells us that we still can’t have ultimate confidence that things are improving. This means there remain a number of unknowns.

However, static is always better than increases and almost certainly means the rate won’t get any higher and will eventually start to drop which will be a good day for everyone involved in property investment.

But this extended period of uncertainty highlights the risks involved with saving methods that are intimately tied to economic performance, which is why more and more investors and savers are turning to alternative avenues such as our Innovative Finance ISA – they deliver impressive and reliable rates and their success is a step removed from the external forces that make other investment assets so volatile.”