Savers have taken a hit (Image: elenaleonova via Getty Images)
Over the past five years, persistent inflation has eaten away at savers’ nest eggs by roughly £1,400, and they could face a similarly grim outcome should price pressures persist. That is according to fresh analysis carried out by financial specialists at Moneyfactscompare.co.uk.
Turning first to mortgages, the experts noted that, since the previous inflation announcement, the Moneyfacts Average Mortgage rate had dropped from 5.71% to 5.64%. Meanwhile, the average two-year fixed rate has declined from 5.83% to 5.73%.
The average five-year fixed rate has slipped from 5.73% to 5.66%. Borrowers remortgaging off an ultra-low five-year fixed rate face a £5,400-plus yearly increase on a typical £250,000 mortgage over 25 years.
Caitlyn Eastell, personal finance analyst at Moneyfactscompare.co.uk, said: “The mortgage market remains highly reactive to ongoing shocks, and swap rates have continued to spike following escalating tensions in the Middle East and the uncertainty around the UK’s political landscape. Interest rates remaining higher for longer will quickly burden borrowers, squeezing their budgets and how much they can afford.
“Millions of households are due to remortgage, but those coming off an ultra-low five-year fixed rate should be prepared to see their repayments spike by more than £5,400 a year. First-time buyers may wish to choose a longer mortgage term as it can help with affordability pressures, however, it also means they may end up paying significantly more interest.
Inflation has hit people (Image: Dusan Dinic via Getty Images)
“Tracker mortgages can look competitive on price, but they leave borrowers more exposed to volatility, as any change in the Bank of England Base rate is directly passed through to monthly repayments. It’s crucial that borrowers seek advice to ensure they get the best possible deal to suit their needs.”
Turning to savings, experts noted that the Consumer Price Index (CPI) dropped to 2.8% in April, down from 3.3% in March. The Moneyfacts Average Savings Rate currently stands at 3.55%, which outpaces inflation, meaning savers can achieve genuine returns on their cash — though shopping around for the most competitive rates remains essential, they warned.
There are currently 1,806 savings accounts that beat inflation – 202 easy access, 178 notice accounts, 180 variable rate ISAs, 410 fixed rate ISAs and 836 fixed rate bonds). In May 2025, there were 1,326 deals that could beat CPI, which was then at 3.5% (April 2025 CPI) and in May 2024, there were 1,558 deals that could beat CPI, which was at 2.3% (April 2024 CPI).
Caitlyn said: “Locking in savings rates has not shielded households from inflation and savers who locked into a five-year term in May 2021 at a top rate of 1.40% may have exposed themselves to significant real-term losses.
“During that time, a £10,000 deposit would now be worth around a modest £10,700, however, with average inflation at around 4.6% per year, its purchasing power would’ve been drastically eroded. In today’s terms, the real value of the investment falls to around £8,600, equating to a real-term loss of around £1,400 over five years.
“While savings rates now sit far higher than in the ultra-low era, and as the top rates are moving in a positive direction, it remains crucial for savers to focus on true value instead of attractive headline rates. The Bank of England’s worst-case scenario projects inflation to reach 5.6% in Q2 of 2027.
“This runs the risk that even with today’s higher savings rates, returns may still lag if price shocks persist. To avoid the same fate of inflation-battered returns, savers need to take a more proactive approach by reviewing deals frequently, making use of their tax-free cash ISA wrappers and avoiding apathy with long-standing accounts that pay below average returns.”