Introduction to Mortgage Rates
As a general rule, mortgage rates tend to fall when the Bank of England lowers interest rates. However, lenders have the final say in the rates they offer, and changes to mortgage deals can often precede or follow changes in the Bank rate.
Current State of Mortgage Rates
Mortgage rates have been on a downward trend since their peak in 2023. The decline in rates accelerated in April as financial markets adjusted their expectations for rates this year. Most major lenders now offer rates below 4% on their best deals. For instance, as of 11 June 2025, the best rate on a five-year fixed-rate mortgage was 3.99%. This suggests that borrowers can currently access relatively affordable mortgage options.
Cash Savings Rates
The rates on cash savings are determined by account providers competing for savers’ deposits. Although these rates are not directly linked to the Bank of England rate, they often move in tandem. Given the predicted falls in the Bank Rate, it’s likely that savings rates will also decrease.
Trends in Cash Savings
The rates on best-buy cash accounts have been declining since last summer. This decline has led to lower headline rates and encouraged savings providers to introduce conditions that could reduce the effective rate. Many high-paying accounts now include temporary interest elements that expire after a certain period or penalize withdrawals with interest losses.
Best Options for Cash Savings
Currently, Cash ISA accounts offer the highest interest rates. As of 19 June 2025, the best rate on a Cash ISA with easy access and without temporary bonus rates was 4.86%. It’s beneficial to utilize tax-free options like ISAs for cash savings, as they shield returns from tax. Non-ISA cash accounts are also available but are subject to income tax, making tax-efficient savings options more appealing.
Alternative Cash Savings Options
Some individuals opt for Premium Bonds, which offer tax-free monthly prizes instead of a guaranteed interest rate. However, the effective return on Premium Bonds has also been decreasing, requiring above-average luck to achieve notable returns.
Investing Cash for Better Returns
An increasingly popular strategy is to move cash savings into investment accounts that utilize assets providing cash-like returns. This approach allows savers to capitalize on attractive cash rates while remaining flexible to switch to investments when suitable. Cash funds or money market funds within investment accounts can serve this purpose. For example, the Fidelity Cash Fund, a best-selling cash fund, is forecasted to yield 4.96% in income for the coming year, or 4.61% after deducting the platform charge.
Current Interest Rates on Cash
The interest rates paid on cash held in various accounts can vary. As of 1 July 2025, the rates are as follows:
- ISA (including Junior ISA): 2.65% gross, 2.68% AER
- Investment Account: 2.65% gross, 2.68% AER
- Cash Management Account: 2.65% gross, 2.68% AER
- SIPP (including Junior SIPP): 2.75% gross, 2.78% AER
Conclusion
In conclusion, mortgage rates and cash savings rates are closely tied to the Bank of England’s interest rates but can also be influenced by lenders and market competition. As rates continue to evolve, it’s essential for individuals to stay informed and consider their options carefully, whether they’re looking to borrow or save. Utilizing tax-efficient savings options and considering investment strategies for cash can help maximize returns in a changing financial landscape.
