A major bank has confirmed it will cut interest rates on its best easy-access savings accounts.

Santander is reducing the rate offered on its Easy Access Saver Limited Edition (Issue 3) off-sale variable rate account.

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It currently pays savers 5.20% on balances between £1 and £250,000.

However, on May 20, the interest rate offered will drop by a whole percentage point to 4.20%.

From today (8 March), Santander will contact all affected account holders to inform them of the new rate two months in advance.

All other terms of the account remain the same and customers can access their funds at any time without any fees.

The retail bank attributes the reduction in savings interest rates to the current market conditions.

A Santander spokesperson said: “Santander regularly reviews product rates to ensure we continue to help our customers get the most for their money in a way that is sustainable in the volatile wider market conditions.

“Our Easy Access Saver Limited Edition (Issue 3) customers will continue to benefit from our best easy access level of 4.20% from May.”

Should I move my money now to get a better rate?

According to MoneyFactsCompare.co.uk, the account remains the best paying account for the time being for people with savings between £1 and £25,000.

Cahoot’s Sunny Day Saver (Issue 1) pays 5.2% interest on savings between £1 and £3,000.

So if you saved $1,000 throughout the year, you would earn $52 in interest if you didn’t make a withdrawal.

Virgin Money offers the second best easy access rate available with its Defined Access E-Saver Issue 21.

Savers get 5.11% back on deposits between £1 and £250,000.

This means that for every €1,000 you save, you get €51.10 back.

However, if you make more than three withdrawals per year, the interest rate temporarily drops to 2%.

Cynergy Bank’s Online Easy Access Account (Issue 69) offers savers 5.1% interest back on deposits between £1 and £1 million, and Hampshire Trust Bank’s Online Easy Access Account (Issue 18) offers 5.09% back on savings between £1 and £250,000.

Personal finance expert Martyn James said: “Switching accounts can be a great way to make some money or make some extra money on the side, but the devil is in the details.

‘Virtually all transfer deals can be withdrawn at any time.

“But more importantly, they all come with benefits. You may have to have your wages deposited into the account or a certain amount of money is deposited into the account every month.”

How do I find the best savings interest rate?

If you are trying to find the best savings rates, there are websites you can use that will show you the best rates available.

If you do some research on websites like MoneyFacts and price comparison sites including Compare the Market and Go Compare, you’ll quickly see what’s out there.

These websites allow you to tailor your searches to an account type that suits you.

There are four main types of fixed savings accounts: notice period, easy access and regular savings account.

According to Moneyfacts data, the best paying savings rate is currently 5.2%.

An easy-to-access account does what it says on the tin and usually allows unlimited withdrawals.

These accounts usually have lower returns, but are a good option if you want the freedom to move your money without being charged a penalty.

A fixed-rate savings account offers one of the highest interest rates, but it comes at the cost of not being able to withdraw your money within the agreed time period.

This means your money is tied up, so even if interest rates rise, you can’t move your money to a better account.

Some providers offer the option to record, but this comes with high costs.

Cancellation accounts work in a similar way, but your money can be locked for shorter periods as savers only need to give notice before withdrawing money.

The highest interest rate on one-year fixed bonds is currently 5.28%, and the highest paying notice period is 5.45%.

Finally, there is a regular savings account. These accounts generate a decent return, but only if you pay a fixed amount every month.

THOUSANDS of first-time buyers missed out on millions of pounds in free cash last year by not putting their savings into a Lifetime ISA.

First-time buyers often use Lifetime ISAs or LISAS to get on the property ladder.

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But a new analysis of government data by savings and investment app Moneybox shows that potentially thousands of first-time buyers could have benefited last year if they had used a LISA.

When you open a LISA, savers get a 25% bonus on top of the money paid into the account, up to £4,000 per year.

So if you save the full €4,000 in the account, the maximum bonus you can earn is €1,000 per year.

However, in 2022/2023, only 56,100 people bought their first home with a Lifetime ISA.

It means that of the 300,000 registered first-time buyers who bought a home during this period, up to 243,900 could have missed out on the government bonus offered by saving in a LISA.

According to Moneybox, this equates to a potential loss of £243,900,000 in ‘free money’ in government LISA bonuses in 2022/2023.

According to Generation Rent, saving a first home deposit now takes an average of ten years.

But for anyone saving with a LISA who can save the full £4,000 each tax year over that period, aspiring first-time buyers can save £40,000 and also get a £10,000 boost through the government bonus.

More than 18 million Britons are currently eligible to open a LISA.

Brian Byrnes, head of personal finance at Moneybox, said: “Saving the money needed for a deposit remains one of the biggest hurdles many face on the road to buying a home.

‘The LISA has been a fantastic support for savers trying to get a deposit together, and perhaps even more importantly, it has instilled healthy savings and investment habits that will stick with people throughout their lives.

“An entire generation of starters in the housing market has made their dream of home ownership come true. More than 170,000 homes have been purchased since the introduction of the product in 2017.”

However, experts including Martin Lewis have warned that many are unable to reap the benefits of these savings accounts due to the finer details.

First-time buyers using a LISA to buy a property can only buy a house costing no more than £450,000.

If savers use the money to buy a property that exceeds the plan’s £450,000 limit, they risk a 6.25% withdrawal penalty.

This means that someone who has saved £20,000 will only get £18,750 of their money back if they choose to withdraw it.

And if you want to withdraw money for any other reason, the fee is 25% of the amount withdrawn.

This is determined after your bonus has been paid out. Please note that you will only receive the bonus if you withdraw money from the account 12 months after your first payment.

Brian said: ‘Introducing a penalty-free annual emergency withdrawal allowance, so that savers are not penalized if they need their money in an emergency, could provide further reassurance to those in need.

“In addition, although the property price cap has affected less than 1% of Moneybox Lifetime ISA customers to date, if it had risen in line with house prices it would have reached £600,000.

“That is why we call for the price ceiling to be indexed in line with house price inflation.”

What types of lifetime ISAs are there?

There are two different types of LISAs: a cash LISA and a stock LISA.

A cash LISA may be worthwhile if you are saving for your first home and plan to buy it within a few years.

Interest is paid out tax-free on both the amount you deposit and on top of the government bonus.

Because the account is an ISA account, the interest earned does not count towards your personal savings allowance.

A stocks and shares LISA may be more suitable if you are saving for your retirement over a longer period.

This is more complex because investment profits come in the form of dividends, capital gains and bond interest.

Here too, the interest earned does not count towards your personal savings deduction.

OUR pets can often make the house feel more like a home.

But as the cost of living worsens, more owners than ever are being forced to give up their furry friends.

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The price of cat and dog food has risen by almost 60 per cent in the past 12 months and research from the RSPCA shows that almost a quarter of owners are concerned about how they will continue to feed their pets.

Dogs Trust has also revealed that the rising costs of food, vet care and insurance are responsible for the record number of calls the company has received from people asking the charity to take in their pets.

As the owner of two cats, I am acutely aware of pet inflation and how picky moggies can be when faced with cheaper food alternatives.

I put eight private label alternatives to the test with my pickiest cat, Wiggins.

Here's how they went down. . .

Whiskas, Waitrose pouches (12 x 85 g) €4.25 and dry food (800 g) €3.30

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It should come as no surprise that these jelly sachets you buy from Waitrose are the most expensive of all the supermarket options.

But to make matters worse, they are also the smallest.

They have the classic overpowering smell of cat food – a mix of processed meat and sick. Each bag contains irregularly sized chunks of meat, which must be ground into a paste to fit into the slow feeder.

It takes Wiggins several trips to the court to eat it all.

The dry food is a hit as usual and smells like a diluted version of the bags.

They are also coated with some powder, which means my cat can smell it as soon as I take the packet out.

Rating: 2/5

Coshida, Lidl Pate and Premium Mix (100g), 39 pcs

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THIS barely smells, which I'm not used to, as most cat food has a rather pungent stench.

The pate looks like unformed hamburger mince, but is much softer than you would like.

It took a while for Wiggins to realize there was food in his bowl, probably due to the lack of smell.

But within 45 minutes of eating the can, he threw it up again. If this isn't a no vote, I don't know what is.

The dry food was better appreciated.

By that I mean that they did not return half-digested.

They are designed to look like the fancy ones the vet sells, but I can barely smell any meat in them.

Rating: 1/5

Complete and balanced nutrition, Tesco pouches (12 x 100g) £2.99 and dry food (2kg) £3.35

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THESE pouches smell pleasantly meaty – not the classic overpowering processed aroma you get with most wet cat food.

The smell is so strong that Wiggins appears out of nowhere and starts scratching my neck.

All pieces of meat in the jelly are perfectly oval and can be easily separated from the jelly. It's a hit everywhere.

The dry food has the best price-quality ratio, but hardly smells, which worries me a bit.

But that doesn't seem to bother Wiggins, who eats them with pleasure.

It's a hit – and a bargain price.

Rating: 5/5

Vitacat, Aldi bags (12 x 100 g) € 2.79 and dry food (800 g) € 3.19

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THE budget supermarket has done its best to give this offering the appearance of a premium brand.

The bags are even branded, which most of our own brands are not.

Like Tesco, the meat pieces are perfectly oval and separate easily from the jelly.

They have quite the meaty smell and make me not want to hold my nose.

The dry food is more expensive than I would like, considering Aldi.

These are also shaped to resemble the type vets give you.

They smell strongly and immediately attract my cat for mealtime.

But after a few bites, Wiggins has lost interest.

Rating: 4/5

Morrisons Tasty bags (12 x 100 g) € 3.90 and complete dry food (2 kg) € 3.55

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As I tear open these bags, they don't smell strongly.

It takes Wiggins breaking them up in the bowl before he shows up for his dinner.

He likes to eat, but it's not as fast as some of the others he's tried this week.

He licks the bowl clean, which is a sign of pleasure.

This wet food is one of the most expensive.

The slightly sweet smell of the dry food reminds me of Go Cat, which is what I normally get.

They look small and round, a bit like rabbit poop.

When I pour them into the dry food bowl, Wiggins shows no interest whatsoever. He stays in his basket.

After an hour he goes to investigate and seems happy with it.

They are slowly eaten over the next 24 hours.

Rating: 3/5

Complete Nutrition Sainsbury's pouches (12 x 100g) £3.50 and dry food (2kg) £3

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THESE bags have a pungent odor that emanates as soon as you tear them open.

Halfway through the tear I feel cat claws digging into my skin.

Wiggins almost starts drooling as I pour the contents into the bowl.

Another with oval-shaped pieces of meat covered in jelly.

He licks away all the jelly before starting on the pieces.

He gets bored quickly and leaves half the bowl.

However, he is less interested in Sainsbury's dry food.

Wiggins appears as I pour the pieces into the bowl, takes a sniff and walks away.

The next morning I see that he ate a snack during the night, but it is minimal compared to the selection in the other supermarkets.

Rating: 3/5

Essential Waitrose pouches (12 x 100g) €3.90 and complete and balanced dry food (950g) €2.20

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DESPITE being a budget option from the supermarket, these pouches are one of the most expensive in the taste test.

Again, the pouches, like many others, are oval, fleshy pieces in jelly.

Wiggins doesn't appear when I open the package, which isn't a good sign because he normally does.

Once it's on his feeding mat, he'll come out and taste it.

He seems unimpressed as he pauses before continuing. That said, he licks the bowl clean.

The dry food smells a bit chemical, which puts me off, but I persevere for the test.

Wiggins smells them and quickly turns his nose up too.

By morning he still has to eat them. That's enough, these are for the trash.

Tiger, Asda bags (12 x 100 g) € 3.90 and dry food (1.2 kg) € 2.50

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THESE bags are cheaper the larger the quantity you buy them in.

I love the packaging and that you get four different flavors in it.

Wiggins appears out of nowhere when I take one out of the box.

Within seconds he is up on the counter trying to poke his head into the unopened package.

Again, they're oval pieces of meat in jelly, like many of the other own-brand options.

It's polished off in seconds, but he doesn't bother to lick his bowl clean.

The dry food is less of a success than the bags.

He barely eats a handful before going to sleep.

But at night he finishes the rest of the dish.

This is a bit too expensive for me to make it a closet staple.

A COUPLE were forced to live in a tent and shower at the gym for months while their home was renovated.

Jeff and Tracey poured their life savings into the house – and even postponed their wedding for years – but angry neighbors say it looks like a 'spaceship'.

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The luxury home was unveiled on Channel 4's Extraordinary Extensions last Friday and viewers watched as the couple shared their shock at being given permission to transform their Sangate bungalow into a home that wouldn't look out of place in an '80s mafia movie.

The couple then told viewers about the sacrifices they had to make while the work was completed, including living in a tent and having to shower every morning at the local gym.

During the show they said: “There have been so many tears.

“From a commitment level, we have been going to the gym to shower for almost a year.”

Before work began, the house was a white 1960s bungalow, but in 2019 the couple applied for planning permission to turn their home into a Miami Vice-style home.

The work included balcony changes, a revised roof design and an increase in the ridge height, reports KentOnline.

During the show, Jeff said: “What I could immediately imagine is that we could add another level to it.

“I could imagine there being all glass on the other side, so we had an unobstructed view of the sea.

“We thought it was a Miami Vice house and we were just going to put it in there and see what [the planning department] says because they don't agree to it, but they did.”

So far they have spent £200,000 on the changes and expect to have to pay a further £75,000 to complete the project – but locals shared their disdain for the new premises.

Disgruntled neighbors said the house – which cost almost £300,000 to renovate – looks like a 'shed on steroids' and a 'spaceship'

They also said the appearance of the house does not suit the area or buildings that populate it, but an officers report from Folkestone and Hythe District Council (FHDC) said the proposal was seen as a “high quality design”.

In the report they also said it would “refresh a dated building in a way that would not significantly detract from the surrounding prevailing development pattern”

Extraordinary Extensions aired on Friday at 8pm on Channel 4 and is available on catchup.

It is not the first time that angry neighbors have spoken out after becoming angry about changes in their environment.

Last year, angry neighbors in Romsey, Hampshire, claimed their privacy was 'ruined' after new builds towered over their homes.

And former Duran Duran frontman Simon Le Bon was told by neighbors that endless construction work on his mansion was ruining their lives.

Finally, residents of Corfe Mullen have criticized a “horrible” new development which they claim resembles an “Amazon warehouse”.

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A SAVVY saver has managed to put away more than £1,000 with a savings challenge – and anyone can do it.

Jacqueline Poutney, 30, lives with her partner in Newcastle.

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The teacher, originally from Watford, decided to set herself the challenge of putting money aside during the pandemic.

She had little knowledge of finances growing up, and her family lived payday to payday.

But she has now managed to save a fair amount of money after discovering the savings challenge hack.

Jackie came across the open banking app Plum and decided to sign up for the weekly roundups first.

It meant that when Jackie spent money, Plum automatically rounded up the amount and put the difference into a pot every Monday.

So a £2.50 spend would become £3, with 50p going into her savings.

Since March 2020, Jackie has saved £990.55 from these roundups alone.

This, Jackie says, all happened without her noticing the money leaving her bank account.

Jackie said: “You don't feel it that much, just once [saving] the balance is being replenished and you don't want to spend it.”

After a few months, Jackie was spurred on by her progress and felt ready to make a bigger commitment to saving.

Plum also offers savings challenges, including the 52-week challenge, where you set aside $1 in the first week, then $2, then $3, and so on.

Ultimately, savers will put £52 into their pot in the final week.

Jackie took part in this challenge and wanted to further increase her savings.

She says she doesn't feel the pressure when it comes to the larger amounts disappearing from her account.

“It works really well because if you're bald in January it costs £1, but if you're buying Christmas presents it costs £52.”

The teacher is now 50 weeks into the 52-week challenge and her total savings to date is £1,275, although she is on course to save £1,378.

This would take her total savings through challenges, including the roundups, to £4,764.

Between these challenges and a stocks and shares ISA with Plum, Jackie has saved a total of £9,762 over the last four years.

Saving challenges can be like a game, and a game you want to win

Jackie says savings challenges are something anyone can do and that £1 can go a long way.

“The fact that I have no financial training at all, to be able to do something, I think that is the step.

“It's to get people on the saving bandwagon.”

As a teacher, Jackie says she tries to implement as many games as possible into her lessons and she found that Plum's challenges were as follows.

“You don't want the balance to come down,” she explains.

“The fact that it was a challenge made me feel like I had to achieve something.”

And there's no pressure to stick to the set amount, as Plum only withdraws what you think you can afford each week.

So when bills come due or you've spent more than usual, it costs less to go to the piggy banks.

“You can adjust it to what you want, go up and down, you can change it.”

Jackie has a house in Newcastle with her partner.

Combined, they have a salary of around £80,000 a year and they both put 50% of their monthly income into a bills account.

The savings Jackie has made through Plum over the past four years have gone towards buying a camper van, a holiday and she recently put £500 towards her mother's 50th birthday.

She said she has dipped into the money every now and then, but it's nice to be able to use it for bigger purchases, instead of trying to take the money out of your monthly income.

Jackie hopes to use her savings and raids to eventually become mortgage free.

She is also spending some on her upcoming wedding.

What savings challenges are there?

There are lots of savings challenges people can try, whether you just want to put in £1 a week or you have a bit more to play with.

Here are some we saw:

1p savings challenge – £668

You start by saving 1 cent and then increase the amount you save by 1 cent each day.

So because day one is 1 cent, day two means you put away 2 cents, and the next day it's 3 cents, and so on.

On day number 365 you add € 3.65 to the bill.

If you started on January 1, 2024 and kept at it, you will have saved a total of $667.95 by December 31, 2024.

52 Week Challenge – £1,378

The 52-week challenge sees participants put aside £1 for the first week, £2 for the second, £3 for the third and so on until the end of the year.

The amounts start small, but by the end of the year the weekly savings goal may become too large.

For example, you should set aside the largest amounts around Christmas, with a total of €202, in the last four weeks of the year.

So before you start, consider whether it will take too much time at an already expensive time of year.

If you can stick with it, the payout is huge: you'll win a whopping £1,378.

You can always turn it around and start with the largest amount (€202 per week) and then go smaller. It may be worth making a chart so you can keep track of the numbers.

365 Day Challenge – £1,456

If the 52-week challenge seems a little intimidating, you may prefer the 365-day challenge.

You save £1 on Sunday, £2 on Monday, £3 on Tuesday and so on, until you save £7 on Saturday – the largest daily amount of the week.

Then you start the process again the following Sunday.

This should give you a weekly saving of £28, which equates to £1,456 over the year's costs.

Round challenge

The round-up challenge involves rounding up the money you've spent and putting that extra money into the piggy bank.

For example, if you bought something that costs €19.30, round it up to €20 and save 70 cents.

It may not sound like much, but if you do this for every transaction, it adds up.

Some banks allow you to do this via your online banking app, so check with whoever you bank with.

If not, this is also possible with apps like Emma and Plum.

Money mistake pot

You can make things more personal with a money box.

The idea is that you challenge yourself not to do something, or not to make a 'mistake'.

Maybe you want to challenge yourself to go running three times a week, or maybe you want to stop buying takeaways.

These can be your “mistakes” and if they are not fulfilled, you can put money in the pot.

How much is completely up to you.

If you don't use cash often, you can put money in a “pot” at banks like Monzo.

Do you have a money problem that needs to be solved? Get in touch by emailing money@the-sun.co.uk.

Moreover, you can join us Sun Money chats and tips Facebook group to share your tips and stories.

The Bank of England held the base rate again at 5.25 per cent last week, sticking at the level it has been at since August last year.

But while the Bank’s benchmark rate hasn’t budged, savings and mortgage rates have dropped substantially in recent months as markets anticipate base rate cuts later this year.

This is good news for borrowers, with the best five-year fixed mortgage rates now below 4 per cent – compared with about 5.5 per cent at their peak last summer.

But it’s bad news for savers, who have also seen fixed rates tumble from their highs – the best one-year fixed rate deal is now 5.16 per cent, a far cry from NS&I’s blockbuster 6.2 per cent offer in early September.

The big question for both borrowers and savers is whether now is a good time to fix. 

For those who need a mortgage, it’s about whether rates are attractive enough to lock in, how long to do so for – and whether they’d save money by waiting.

For savers, it’s a question of whether they should take the chance to bag rates above 5 per cent now, before they are all gone.

Muddying the waters is the fact that both mortgage and savings rates are also dependent on money market sentiment – and this means they could move up or down independently of what the Bank of England decides.

In a shining example of that, even as the Bank of England held rates and opened the door to cuts coming this year, Britain’s biggest building society announced it was hiking mortgage costs.

So, what should you do with your mortgage and savings? In our definitive guide on whether to fix, we look at the forecasts for interest rates, savings and mortgages and ask our panel of savings and mortgage experts what they would do.

What has happened to savings rates?

After years in the doldrums, savers have started to get much better rates since the Bank of England stared raising the base rate.

As with mortgages, savers have seen a couple of points where savings rates have rapidly accelerated. Most notably, this occurred over summer last year, when almost every day brought a flurry of rate rises from banks and building societies.

The biggest battle ground was shorter term fixed rate savings deals, particularly one and two-year fixed rate bonds.

The high water mark came with NS&I’s 6.2 per cent one-year fixed rate Guaranteed Growth Bond. This was launched at the end of August last year and lasted just over a month before it was pulled at the start of October.

The top one-year fixes now pay just under 5.2 per cent. 

Easy access savings deals lagged fixed rates as they accelerated over the summer, but as the latter have been cut back, they are now at a similar level to fixes and broadly similar to where they were in September.

Will fixed rate savings keep falling?

The big concern for savers is that fixed rates will continue their downward trajectory and This is Money and the Mail’s Savings Guru, Sylvia Morris warns that not only is this likely to happen but easy access rates will probably follow them down too. 

She says: ‘Rates on these accounts are aligned with the Bank of England base rate rather than the money markets. 

‘As soon as the Bank cuts its base rate, providers will be quick off the mark in culling the rates on their easy-access accounts. 

‘They could even cut them earlier if providers think a future cut looks inevitable.’

The decline in fixed savings rates has come despite the Bank of England holding base rate steady since August. The answer to why lies in the fact that fixed-rate savings are priced based on money market rates, which reflect what markets think will happen to base rate in future. 

This means fixed savings rates can often run ahead of what the Bank of England does, hence the substantial cuts in recent months.

A potential silver lining for savers is that markets may have overcooked their expectations for how soon and how swiftly the base rate will fall, this could stem the tide of cuts and even see a few rises.

What are the best savings rates now?

The top one-year fixed rate in This is Money’s independent best buy savings tables is now Smartsave’s 5.16 per cent account.

The top two-year fixed rate is Close Brothers’ 4.95 per cent deal and the top five-year fixed rate pays even less, with Smartsave offering 4.36 per cent. 

The top deal in This is Money’s easy access savings tables is Coventry Building Society’s Triple Access Saver at 5.15 per cent.

The best one-year fixed rate in This is Money’s cash Isa tables is Shawbrook Bank’s 4.98 per cent account, while the best easy access cash Isa is Zopa’s 5.08 per cent account.

Should you fix your savings?

Right now, you can earn the same rate of around 5 per cent whether you leave your money in an easy-access account or tie it up for a year or two.

It’s unusual to get the same rate. Normally you are paid extra for agreeing not to touch your money for a year or more.

The parity has come about because fixed rate bonds have already priced in the fact that interest rates are expected to fall in the coming months while easy-access rates haven’t.

Fixed-rate bonds already dropped from a high of 6 per cent plus for one year in the autumn to just over 5 per cent at best now, even though the base rate has stayed steady at 5.25 per cent since last August.

The verdict: Savers might be tempted into a state of inertia by thinking they have already missed the best rates and there’s no point bothering now. But fixed rate deals above 5 per cent beat inflation and look great value compared to what banks offered a few years ago.

Don’t tie up money in fixed rate savings that you may need for a rainy day – this should go into an easy access account, where you can get it quickly – but our experts say that savers with larger pots should lock some of it in to good rates.

Shorter term fixed rate savings look most attractive and give an extra degree of flexibility over five-year deals. Those willing to tie up savings for five years, should potentially consider whether they should be investing it instead.

Whatever they do, savers should preferably do it through a cash Isa. Rising rates have dragged more people into paying savings tax, as their interest rises through the personal savings allowance that is set at £1,000 for basic rate taxpayers and £500 for higher rate taxpayers. 

What has happened to mortgage rates?

Since the base rate started going up in 2021, mortgage rates have soared – adding hundreds of pounds to monthly payments for those who have had to remortgage.

An estimated 1.6 million mortgage borrowers will come to the end of two or five-year fixed rate mortgages this year, on which they are likely to have been paying 2 per cent interest or less and now face rates at about 5 per cent.

On a £200,000 mortgage over a term of 25 years, this would mean monthly payments rising from £885 to £1,235 – an increase of £350 per month.

This prospective payment shock means the mortgage market over the past 18 months has been a nerve-racking rollercoaster ride for homeowners.  With ups and downs along the way, most notably the post-Liz Truss mini-Budget spike and then a sudden inflation-driven mortgage shock over summer.

The average two-year fixed mortgage rate is now 5.56 per cent, according to Moneyfacts, and the average five-year fix is 5.18 per cent.

These rates are much higher than many borrowers had become used to over the past decade, but they have come down substantially from their peak last summer – a trend that accelerated in recent weeks.

As recently as mid-December, those averages were 5.99 per cent and 5.59 per cent. In summer 2023, they were even higher at 6.86 per cent and 6.37 per cent.

The best fixed mortgage rates are considerably lower than average rates, with NatWest offering a five-year fix at 3.89 per cent.

‘The good news is that rates are much better for both two and five-year fixes than they were last summer when they spiked,’ says David Hollingworth, mortgage expert at broker L&C and This is Money’s mortgage columnist.

‘However, they will still be higher than the ultra-low fixed rates that may be coming to an end now, so many will be facing a jump in payments.’

Will fixed rate mortgages keep getting cheaper?

There was a rush of rate reductions in early January, but the pace of these has slowed and further dramatic cuts seem unlikely.

Instead, experts suggest home loan cuts have run ahead of the Bank of England predict mortgage rates will gradually move down as we get closer to the first base rate cuts. These are currently forecast for May or June.

Nicholas Mendes, mortgage technical manager at broker John Charcol, says: ‘Depending on inflation data and the wider economic and political landscape, we could see five-year fixed rates go below 3.5 per cent in the second half of this year. Similarly, two-year fixed rates could break the 4 per cent benchmark.

‘But nothing can be taken for granted when it comes to market sentiment. With a general election around the corner, global instability, and core inflation remaining at 5.1 per cent, we are certainly not out of the woods yet.’

And it’s even possible that mortgage rates could rise from here. Following the January round of aggressive cuts, some mortgage lenders have put costs up in recent weeks, most notably Nationwide and Santander.

However, experts say some banks were merely correcting their rates as they had been slightly over-confident with  New Year price cuts, and that this does not necessarily indicate further rate rises to come.

At some points, lenders offered mortgage rates cheaper than swap rates – the forward-looking indicators which predict where base rate will be two or five years in the future.

‘[Pricing based on swap rates] means lenders can be over-reactive or over-confident at times,’ Mendes explains. ‘They typically price their products a fortnight in advance, which means they can be caught out if the market moves quickly.’

What are the best mortgage deals now?

The cheapest five-year fix available is with NatWest and has a rate of 3.89 per cent, charging fees pf £1,544. This is for those who have a 40 per cent deposit or equity.

On a two-year fix the cheapest rate is 4.17 per cent with Halifax, again for someone with a 40 per cent deposit and charging a £1,099 fee.

Someone with a 25 per cent deposit or equity could get a 4.04 per cent rate with Nationwide, also charging a fee of £999.

On a five-year fix, they could get a two-year fix with Nationwide at 4.25 per cent, charging a £999 fee.

With a 10 per cent deposit, the best five-year rate is with Virgin Money. It has a rate of 4.40 per cent and a £1,009 fee.

For a two-year fix, Nationwide offers a 4.86 per cent rate with a £999 fee.

These figures are based on a mortgage on a £250,000 home, taken on a 25-year term. 

You can find the best mortgages for your home value and loan size using This is Money’s mortgage search tool.  

It is also important to remember that the lowest rate may not be the best deal – especially if it comes with a large fee. You can calculate the overall cost of a mortgage, including any fees, using our calculator.

Should you fix your mortgage and how long for?

Most mortgage borrowers still prefer the security of a fixed rate. 

But many people are now opting for two-year fixes instead of five, even though these are more expensive. This is because they think mortgage rates will have fallen by the time their deals end in 2026, and they can switch on to a cheaper deal at that point.

Mark Harris, chief executive of broker SPF Private Clients, says: ‘While five-year fixes have fallen below 4 per cent in some instances, some clients are opting for shorter, two-year fixes in the hope that by the time they come to remortgage again, rates will be more palatable and they will be fixing for longer at a lower rate.’

While most forecasts currently predict cheaper mortgage rates in two years’ time, it is impossible to be certain. 

If they find a five-year fix that they can comfortably afford, some borrowers may prefer to have the security of knowing what their monthly payments will be for a longer term. They will also be on a slightly cheaper rate for at least the first two years.

‘There’s no guarantee rates will fall in two years, and five-year fixes currently offer lower rates, so it’s a tough call,’ says Hollingworth.

For those who are willing to put up with some volatility in exchange for potentially getting a cheaper rate sooner, another option is to take a tracker mortgage following the base rate for now, and then jump on to a fix once rates fall to a level they are comfortable with. 

Trackers usually follow the base rate, plus a certain percentage. For example, one of today’s cheapest trackers is from Skipton Building Society, offering a rate of base plus 0.79 per cent, which currently means the borrower would pay 6.04 per cent, as well as a £995 fee. 

To do this, they will need to make sure they can afford the initial repayments – which will probably be higher than on a fixed rate – and choose one with no charges if they exit early.

Skipton’s deal, for example, tracks for two years but there are no early repayment charges. 

Verdict: If you need to remortgage at a certain point, experts say don’t hang around paying a lender’s expensive standard variable rate while you wait to act.

Instead, make the decision on whether to fix and how long for – or if you want to take a punt on rates falling, get a base rate tracker deal.

The message from our panel of experts is that most people should fix but they need to decide how long for.

Fixing for two years is popular and markets believe interest rates will be lower when those deals end but there is no guarantee of that and mortgage rates have already come down substantially form their highs. A two-year fix also means paying a higher rate for at least the first 24 months and a fresh set of fees to remortgage in 2026.

A five-year fix gives security of payments and starts cheaper and if you have a big deposit rates look far more attractive than they once were. 

The advantage mortgage borrowers have over savers is that they can speak to brokers, who will give them regulated advice on what to do and search the market for the best deal for them. Some brokers, such as This is Money’s partner L&C are fee-free and only earn their money through commission from the lender (others charge a fee and take commission).

You can lock into a fix with many mortgage lenders up to six months in advance with no commitment to take it – if rates fall between now and then you could swap to a cheaper deal. So if your mortgage is up for renewal before summer, act now, seriously consider fixing and speak to a broker.

THE NUMBER of Britons choosing to invest their money in shares fell last year as economic uncertainty and the high cost of living suppressed the market.

Research among 2,000 adults in the UK found that only 26 percent chose to put their money in something other than a regular savings account or cash ISA last year, a drop of six percent on 2022 figures.

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More than a third (36 percent) said they simply couldn't afford to invest and 22 percent decided to prioritize saving because of the high interest rates they could get.

Nearly two in ten (19 percent) admit they are not confident they know how to invest, while 26 percent don't because they fear losing their money.

However, of those who did invest last year, 40 percent said they felt more confident investing last year than ever before.

And 36 percent of these started investing for the first time last year.

Brian Byrnes, head of personal finance at savings and investment app Moneybox, who commissioned the studysaid: “The research shows that many people have prioritized saving over investment over the past year, perhaps understandably tempted by the highest cash interest rates in more than a decade.

“For some, this has undoubtedly been a sensible, informed decision, but many may be surprised to learn that investing alone, rather than saving cash, would have kept pace with inflation through 2023.

“If you already have a rainy day fund set aside and are looking at the long term, investing is one of the best ways to grow your money over time.

“Saving and investing should both be viewed as essential components of a financial plan that will help you achieve your short- and longer-term financial goals.”

Of those who chose to invest in the past twelve months, the most common motivation was to build wealth for the future (50 percent).

And 36 percent invest in a more comfortable pension.

Nearly three in ten (29 percent) are investing to help them achieve their long-term financial goals as quickly as possible, while 27 percent want to grow their money to provide for their family in the future.

The survey, conducted via OnePoll, also looked at the impact the crisis has had on the cost of living – and 34 percent said it has made them think about how they can become more financially resilient.

Looking at their financial plans for the coming year, 31 percent prioritize building a rainy day fund, while 12 percent are committed to setting clear financial goals and plans to achieve them.

And another 12 percent want to kick-start their investment journey in 2024.

Brian Byrnes of Moneybox adds: “For far too long, investing has been seen as inaccessible and confusing, with many people struggling to know how to even get started.

“Thankfully this is changing and it's great to see people becoming more confident investors over time.

“Because the truth is that becoming financially resilient is about so much more than building a rainy day fund, although that is a very important part of it.

'It requires a long-term approach to the way we manage our money and plan our finances for the future.

“Building wealth over a lifetime is how you become financially resilient, and historically, investing has been the most reliable way to grow your money over time.”

A savvy mum has revealed she has a low-spending month in January but her kids hate her frugal behaviour.

Maddy Alexander-Grout, 40, from Southampton, was £40,000 in debt at the age of 23 after a spending addiction took hold of her life.

Living on just £15 a week for food for three years, the mum-of-two became obsessed with thrift and swears by yellow sticker purchases, charity shopping and clever savings tips – helping her pay off her debt in just five years. year.

This January, Maddy, mother to eight-year-old Ben and four-year-old Harriet, will only buy the essentials – with bills and groceries taking priority when it comes to her monthly expenses.

By doing this she estimates she will save £300 this month – despite the frugal method making her children quite grumpy.

“If it’s not essential, it won’t be bought,” says Maddy, who shares her tips, tricks and money-saving hacks with her 53,000 TikTok followers.

‘I’m going to save the money I would have otherwise spent. The kids are grumpy about it!

‘They’re not used to doing the things we would normally do, like getting a McDonald’s or playing softly, which they really enjoy doing.

“They like a McDonald’s every now and then, and I told them that doesn’t happen.”

She added: “I also told them that if they want it bad enough, they can spend their own money on it.

“It helps them learn the value of money and also helps them be more grateful for the things we buy for them.”

Essentials include food, bills and child care, as well as her children’s regular activities, such as soccer.

But nothing else makes the cut, with Maddy being brazen about what she can and cannot justify – and saving the money she would have otherwise spent.

She said: ‘For example, the money I would spend on getting my eyelashes done, I put in a jar.

“When the kids ask me for a McDonald’s, I put that money in a jar.

‘It gives me a very good head start for the year.

‘I lived on £15 a week of food for about three years while I paid off the debts.

‘I became obsessed with yellow sticker and charity shops and paid off my debts in full within five years.’

To curb impulse spending, the mum-of-two is also taking on two money-saving challenges – saving pennies and saving pounds – aiming to save just over £1,000 in a year.

Maddy and husband James, 42, want to put away just £1 a day.

She said, ‘This is the simplest. Over the course of the year you will save €365.

‘[The 1p challenge] It starts with you saving 1 cent on the first day and then increasing by 1 cent every day.

‘So on the last day (day 365) you save £3.65 – a saving of £668 [in total].’

The frugal mother said her husband supports her creative ways to save their family’s money and her friends understand that too. They even go so far as to treat the mother to coffee, so she doesn’t have to miss the fun.

She also estimates that the family will save £300 by avoiding soft play and days out and instead opting for playdates at home.

Maddy added: ‘I’m far too generous with the kids’ days out, and sometimes it’s just easier to have a gentle play out – but we stick to it!

‘Instead we go for a lot of walks, trips to the park and also to the skate park. They both got a second-hand scooter at Christmas, so they love scootering around the skate park.”

Maddy has also created her own money app ‘Mad about Money’ to help account for her spending and aims to help others with their money problems.

She added: ‘If you’re struggling with money don’t bury your head in the sand, I’ve done it for too long.

“Facing your money problems is the only way to solve them.”