Savers suffer as lenders drive down rates

Lenders have been steadily reducing the interest they charge on mortgages during the past two months as competition slowly returns to the market, financial information group Moneyfacts said yesterday.

But it said that while this was good news for borrowers, it was bad news for savers, as lenders were also cutting the returns they paid depositors to maintain their balance sheets.

The average cost of a two-year fixed-rate mortgage has fallen by 0.24 per cent since November, but this has been matched by a 0.23 per cent reduction in the average rate paid on five-year bonds, currently the most competitive area of the savings market.

One and three-year bonds have also suffered average reductions of 0.22 per cent and 0.17 per cent respectively.