Savers will have been disappointed that the Bank of England did not increase the base rate this week, but mortgage borrowers breathed a collective sigh of relief.
The stability of savings rates will hopefully discourage lenders from hiking the cost of mortgage lending, according to mortgage advisors John Charcol.
Ray Boulger, spokesperson for John Charcol, said that maintaining the base rate at its record low of 0.5 per cent, coupled with a further injection of £25billion into the financial sector, will paint a 'brighter picture' for mortgage borrowers.
Savers are also helping in other ways - by driving competition, and because lenders have been able to use the increased levels of savings deposits to fund mortgage lending.
"Despite significant increases in swap rates, both fixed and tracker mortgage rates have fallen during the last month," said Mr Boulger. "Prior to the credit crunch increases in wholesale rates on this scale would certainly have resulted in the cost of fixed rate mortgages rising."
For example, an increasing number of providers offering five year fixed rate bonds have upped the interest rate to five per cent or higher, and while this signifies higher levels of competition in the savings sector, the top interest rate has remained relatively static, leaving little justification for increasing mortgage rates.
"The relative stability of savings rates has helped to avoid mortgage rates increasing," Mr Boulger concluded.
Other factors have also driven competition in the mortgage market, Mr Boulger added, such as the resurgence of Northern Rock which has been cutting its mortgage rates, forcing other lenders to do the same or miss their targets for new lending.
© Fair Investment Company Ltd