BORROWERS are still winning the interest rate war while savers are losing it, with banks cutting mortgage rates at the same time as failing to lift savings rates.

Indeed, the average cost of a fixed-rate mortgage has fallen for the first time in 12 months, despite the base rate increasing from 0.5 per cent to 0.75% in August.

The average two-year rate dropped from 2.53% in September to 2.49% in October.

Charlotte Nelson at Moneyfacts noted that while this is counterintuitive, it is a sign that providers are using rates to try to attract customers to their mortgage products.

“Many would have assumed that the average rate would have increased in the aftermath of the base rate rise this August, however the opposite seems to be the case,” she said.

“Providers have started to reignite competition in the market to attract remortgage customers and retain their mortgage books.”

However, savers are continuing to suffer as the 10-year anniversary passed this week of the coordinated move by global central banks to begin pressing interest rates to the floor.

Andrew Hagger of MoneyComms said: “High street banks and building societies are still not fighting hard enough for our savings balances, with many failing to pass on the August 0.25 [percentage point] interest rate hike to their customers.”

On October 8 2008, as central banks acted to ward off the looming global recession, the Bank of England cut its base rate from 5% to 4.5%.

By March 2009 the base rate had fallen to 0.5% and, after being cut further to 0.25% in August 2016, did not experience any rise at all until August this year.

In 2008 over 12 million people had their savings invested in cash Isas, but last year the number of accounts was down by 8% on the previous year and by 36% on 2008.

The trend has accelerated since the launch in 2015 of the personal savings allowance, which enables basic-rate taxpayers to earn £1,000 of savings interest each year without having to pay tax on the income.

Douglas Cameron at Brewin Dolphin commented: “It’s no surprise that people are abandoning cash Isas – why bother when you’re highly unlikely to be breaching the £1,000 tax-free interest threshold?

"You would need to have a whopping £100,000 in the bank earning a relatively hard-to-come-by rate of 1% to breach that limit.”

Meanwhile, the number of stocks and shares Isas being held rose by a record 246,000 last year while the total amount subscribed also hit a new record at £28.7 billion, three times the 2007 level.

Cameron said: “With a stocks and shares Isa, while you could get back less than you invested, there’s the potential for inflation-busting returns.

"From a long-term balanced portfolio, you could reasonably have expected a return of 6 to 8% per annum in recent years.

"You can also spread risk, by including fixed-income products and alternative assets, place your income-producing assets in the tax-efficient Isa wrapper and shield your investments from capital gains.”

Being able to protect savings from the effects of inflation in a low interest-rate environment is important, according to Fidelity International personal investing director Ed Monk, who said that £10,000 invested in the average savings account over the past 10 years would now be worth £7,635 if adjusted for inflation.

But too many savers are in the dark about the impact of inflation, according to research for investment specialist BondMason, which found that a tenth of people with over £25,000 in savings and investments believe that inflation has no effect at all.

Almost 10% of savers were unaware of the alternatives to bank savings accounts and 22% thought all other options were too risky. Almost 15% had increased their bank deposits since 2008.

Stephen Findlay at BondMason said: “For those who invested £10,000 into fixed-term bonds, their money would now be worth £11,434 in real terms after the impact of inflation if they were receiving 3.5% per annum. If they had put it in a simple UK stock market tracker fund they would have would have made a real gain of £3,384.”

Despite this, Mr Hagger at MoneyComms said it is not all bad news, with some challenger banks and less well-known brands “battling it out in the best buys”.

He noted, for example, that Goldman Sachs’ retail brand Marcus is paying a rate of 1.5% on its instant access saver, although the figure includes a 0.15% bonus that expires after 12 months, while Shawbrook Bank and Charter Savings Bank are both offering “a very competitive” 1.4%.