Mortgage rates have fallen to a record low but this has caused further pain for savers, who have seen their average returns fall below 1pc.
The Bank of England made two emergency cuts to the Bank Rate at the start of the coronavirus pandemic and this caused mortgage borrowing costs to plummet.
Industry analyst Moneyfacts said two-year fixed-rate mortgages had fallen to 1.99pc, the lowest since its records began in 2007.
Five-year deals have also fallen to the lowest level on record, with the typical loan charging borrowers 2.25pc.
While this has been great news for homeowners, savers have suffered as rates have reached new lows. All savings accounts, including easy-access, fixed-rate and Isas, now pay an average interest rate of less than 1pc.
The average easy-access rate is now 0.24pc, Moneyfacts found. As recently as January the average rate was 0.59pc. Today, there are multiple accounts which pay 0.01pc to customers.
As well as lower rates, savers must choose from a smaller number of accounts. There are 1,081 savings accounts on the market today and a further 317 Isas, the lowest figure since records began.
Since the start of March, 370 options have disappeared from the market. This figure includes the withdrawal of Marcus by Goldman Sachs’ flagship savings account.
Rachel Springall, of Moneyfacts, said banks which offered higher than average savings accounts were often flooded with funds, forcing them to withdraw accounts or reduce their rates.
“The outlook for the savings market appears uncertain and providers will need to continue to adjust their market position if they are dealing with an influx of deposits,” she said. “It is imperative that savers act quickly to take advantage of the top rates as providers are repricing deals rapidly.”
Although mortgage rates have been falling, the choice of deals has also been limited in recent months. There were 82 fewer deals available at the start of July compared to a month ago.
Hardest hit were those seeking low-deposit mortgages, as virtually all major mortgage lenders ceased lending to customers with a 5pc or 10pc deposit.
However, there are signs that this market could soon return as Nationwide, the country’s second biggest mortgage lender, yesterday announced it would restart 90pc mortgages on July 20. This follows Chancellor Rishi Sunak’s move to shore up the housing market by temporarily reducing stamp duty.
Coventry Building Society has also returned to the 90pc mortgage market for two days as a trial, and it is hoped that other banks and building societies will follow suit.
Ms Springall said that while some homeowners were benefiting from lower rates, first-time buyers and the self-employed had few options.
“We are left with a very mixed picture for potential new mortgage customers,” she said. “Those with higher levels of deposit or equity are seeing continued reductions in the average rates available and the prospect of saving potentially thousands on stamp duty will be a fantastic incentive to progress any home moves.
“However, for those with only 5pc or 10pc deposit or equity, the outlook remains bleak.”