Get Your Best Mortgage Deal, Completely Fee-Free!

Will mortgage rates go down in 2024 UK?

WE WORK WITH 90+ MORTGAGE LENDERS
In this guide:
    Add a header to begin generating the table of contents

    On the 20th of May 2024, when the Bank of England (BOE) last had a committee, they chose to keep the base rate at 5.25%. This decision was made amidst fluctuating inflation rates and increased living costs. Despite positive signs that inflation was finally coming under control, the BOE maintained the interest rate, signaling a concerted effort to steer the economy towards stability. Since the end of 2023, 2024 has seen UK inflation drop from 4.4% to 3.9% at the end of Q1 2024. In June 2024 the inflation rate decrased even further which now sits at 2%.

    The base rate rises throughout 2023 were an attempt to curb UK inflation, which has worked, falling from its highest peak of 9.6% back in October 2022 but still above their desired goal rate of 2%. The latest base rate meeting was the seventh time since August 2023 that the base rate remained the same after a run of 14 base rate increases. Earlier this year the Monetary Policy Committee at the Bank of England approved the ability to increase interest rates by 0.25%, a more conservative rise compared to the previously forecasted 0.5%. This shift signifies a “massive improvement” from the figures reported in May and brings a sense of relief, especially considering that experts had anticipated a decrease between April and May, but the figures remained stagnant.

    Interest Rate Predictions

    Looking ahead, analysts now believe the UK interest rates have hit their peak. It is widely believed that the base rate will not rise anywhere near the earlier predictions of 6%. This is a notable decrease from early 2023 when the markets had priced in rates rising as high as 6.5% by May 2024. Now we are in the second half of 2024 the base rate sits a massive 1.25% lower than these rates predicted a year ago, showing we are heading in the right direction for rates to fall during 2024.

    It is widely predicted that the base rate will drop 0.25% one to two times during the second half of 2024.

    Given these new predictions, the landscape of mortgage rates in 2024 is set to change. Let’s explore what this means for homeowners and potential buyers.

    Mortgage Rate Predictions 2024

    Mortgage rate predictions for 2024 suggest a plateau in base rate rises until the second half of the year. Bank of England’s decisions, inflation rates, and global economic events all play an essential role in shaping these changes. As of June 2024, the average rate on a two-year fixed deal sits at 5.41%, and the average rate on a five-year fixed deal sits at to 5.03%. These are hovering around the highest levels since August 2008, around the peak of the financial crash.

    The last Bank of England meeting was on the 20th June 2024, when they decided to keep the base rate at 5.25%. This could directly influence mortgage rates throughout the rest of 2024. Unexpected economic events could alter these predictions as well.

    It is my observation after reading market predictions that the Bank of England base rate will most likely not rise again during 2024. This will be the case if inflation continues to drop as it has been, which now currently sits at 2%.

    As inflation drops, we are starting to see a swing for 2-year and 3-year fixed rates over the longer 5-year rates, which will be the opposite of what we have seen over the last 18 months. We are already seeing mortgage rates drop from 5% to 4%, and by the end of the year, going into 2025, they are predicted to drop even further, potentially even to 3%.

    I can see a demand and trend for tracker mortgage rates in 2024 and the likelihood we may see new innovative products launched by the mortgage lenders. These could be tracker rates that would allow you to convert to a fixed rate during the term without paying extra fees. – Steve Roberts

    Mortgage Rate Predictions 2025

    Leading economists have recently updated their forecasts for interest rates in 2025, bringing some potentially good news for those seeking mortgages or renewals.

    Paul Dales, chief UK economist at Capital Economics, has revised their prediction, stating that the Bank Rate is expected to drop as low as 3% in 2025, lower than their previous expectation of 3.25%. This adjustment stems from softer-than-expected figures on both CPI inflation and wage growth released in December.

    Goldman Sachs anticipates an even earlier reduction, predicting the first rate cut in May, a decision that could save households £11bn by the end of next year. They expect policymakers to begin cutting rates by a quarter of a percentage point at every meeting from May, continuing until rates hit 3% in May 2025.

    Money markets align with this view, predicting that the Bank of England will start reducing interest rates from May, with bets implying rates will be cut to 3.75% by the end of the year.

    The Bank of England’s proactive approach to cutting rates is aimed at bolstering the economy, signalling a significant shift from the current rate of 5.25%. This change is anticipated to have a noticeable impact on the mortgage market in 2025.

    Fixed Rate Mortgages: Should You Fix Your Mortgage Rate Now?

    Over the last few weeks, mortgage lenders have pulled hundreds of fixed-rate mortgage deals and raised the mortgage rates on their best mortgage deals as they are worried the BOE may raise its base rate further.

    With the BOE base rate at 5.25% and the market pricing further increasing, you should consider fixing your mortgage if you are worried about how high-interest rates might go and whether you can keep up your mortgage monthly repayments.

    Even if you are currently on a fixed-rate mortgage, where the fixed period isn’t due to expire for another 6 months, it is possible to lock in a cheap rate now, which will start when your current fixed deal ends, avoiding any early redemption charges from your existing lender.

    Discuss your options with a knowledgeable advisor
    Put the odds of a successful mortgage in your favour with the help of a qualified and experienced mortgage broker.

    How is the Bank of England base rate set?

    The Monetary Policy Committee of the Bank of England is responsible for setting its official base rate. Meeting approximately every six weeks, MPC meets to decide on any potential changes and publishes its decision and meeting minutes on its website.

    The decision on setting the base rate is informed by several economic indicators, including employment, inflation, and GDP. The current Governor of the Bank of England Andrew Bailey continues to use an established list of 18 economic indicators as part of his Monetary Policy Committee decision-making process outlined by former Governor Mark Carney.

    When is the market predicting mortgage rates will change?

    The market’s predictions regarding mortgage rates have seen some significant changes recently. As of the 9th May, the Bank of England (BoE) kept the base rate at 5.25%. This is due to the drop in inflation that currently stands at 2% annually; lower than earlier in 2023 but still not below its target rate of 2%.

    Looking further ahead, UK interest rates are now expected to be at their peak. This is a notable decrease from earlier this month when the markets had priced in rates rising as high as 6.5% by March 2024.

    Given these new predictions, homeowners and potential buyers alike should carefully evaluate all their mortgage options when making this important decision. The Bank of England will next meet on the 1st August 2024, to decide whether interest rates will remain the same or decrease, it is not likely the base rate will rise again in 2024. If inflation continues to drop in 2024 it is believed the base rate will continue to remain the same or even drop slightly.

    What are the key indicators that will impact interest rate changes?

    The Bank of England uses several economic indicators when deciding whether or not to increase interest rates, including:

    • Inflation: In June 2024, UK inflation stood at 2.4%, which represents a decline from March 2023 but is still higher than its official target of 2%.
    • Official Support for Low Rates: The Bank of England’s Monetary Policy Committee (MPC) has decided to keep its base rate at 5.25%.
    • Economic Developments: The UK’s GDP is estimated to have grown by 0.6% in the first quarter of 2024. Specifically, the GDP increased by 0.4% in March, following growth of 0.2% in February.
    • Bank of England Forecasts: UK GDP is expected to have risen by 0.4% in the first quarter of 2024 and is projected to grow by 0.2% in the second quarter.
    • Unemployment: From January to March 2024, unemployment in the UK stood at 4.3%.
    • Wage Growth: Regular pay (excluding bonuses) rose 6.0% annually between December 2023 and February 2024, while average total pay grew 5.6% during this time.
    • Economic Forecasts: The UK economy is expected to grow by 0.3% in 2024, and to accelerate to 0.9% in 2025.

    What to do with my mortgage in 2024?

    The ability to remortgage and fix your mortgage at the same sort of rate has become more difficult over recent years as the rules surrounding the affordability checks when applying for a mortgage were tightened leaving some borrowers stranded on their existing deals.

    It’s important to calculate the impact of future interest rate rises and seek advice from a mortgage expert ahead of time by following the steps below. Whether you are on a tracker mortgage, variable rate mortgage, or looking to remortgage your existing fixed rate deal that is coming to an end the steps below will take you a few seconds but could prevent your mortgage repayments crippling your finances in the future and help you secure fixed mortgage rates while they are still available.

    Step 1 – Determine your current mortgage situation

    Before you can determine the best course of action for your mortgage, it is important to understand your current situation. This information includes what type of mortgage (variable, fixed rates, or tracker rates), your current rate, and loan term. If you need help understanding these details further, contact your mortgage lender or review your documents to gain a clear picture.

    Step 2 – Calculate the impact of an interest rate increase on your mortgage payments

    An interest rate rise calculator allows you to quickly assess the potential effects of an increase in interest rates on your monthly mortgage payments. Simply input details such as loan amount, term length, and current interest rate before increasing it in various scenarios to calculate potential changes in monthly payments based on different interest rate scenarios and figure out how much additional funds would need to be set aside in case an increase takes place. This tool gives a good indication of what to budget for in case an interest rate increase occurs.

    Step 3 – Seek advice from a mortgage expert

    If an interest rate increase will have an adverse impact on your mortgage payments, consulting a mortgage expert is highly advised. They can assess the housing market as well as your current financial situation and assist in understanding potential solutions such as fixed rate or alternative types of loans; also helping find you the most competitive rates and terms possible according to your unique situation.

    Step 4 – Act quickly if you decide to fix your mortgage rate

    When considering fixing your mortgage rate as the optimal course of action, acting swiftly is key. The lowest fixed-rate mortgages offers often vanish quickly when there are indications from the Bank of England of potential rate hikes; take immediate steps to secure one before it disappears! A mortgage expert can help compare different mortgage deals and assist in the application process to make sure you secure an excellent rate.

    The best way to find out your mortgage options

    One way to find the right mortgage options for you is to collaborate with an independent mortgage adviser. While price comparison sites may seem like an effective solution, it’s important to remember that many deals only available through advisers aren’t listed here and may only appear after credit checks have taken place – which could negatively impact future applications for loans.

    Due to these considerations, working with an independent mortgage adviser is often beneficial; they can assist in finding you the most beneficial mortgage deal from lenders that will actually lend to you – approximately 70% of borrowers opt for this route. To start off your journey toward refinancing, reach out to an adviser or mortgage broker. With fixed-rate deals being withdrawn on a daily basis, it’s never been more important to be on top of your mortgage options before we see further interest rate rises.

    Discuss your options with a knowledgeable advisor
    Put the odds of a successful mortgage in your favour with the help of a qualified and experienced mortgage broker.

    Further reading

    FAQs

    In 2024, UK mortgage rates are expected to decline gradually, as the Bank of England lowers its base rate in response to easing inflation and slowing economic growth. As of December 2023, the average rate on a two-year fixed deal is 6.1%, and for a five-year fixed deal, it’s 5.5%. Forecasts suggest that the Bank of England base rate, which influences mortgage rates, might drop from 5.25% to 4.5% by the end of 2024. However, these are only estimates, and actual rates will depend on various factors such as the economy, inflation, and the Bank of England’s decisions. It’s always advisable to consult with a mortgage advisor when making decisions related to mortgages.

    Interest rates are likely to stay high for the first half of 2024, before falling significantly in the second half of the year. According to the IMF, the recent spike in real interest rates is temporary and should revert to pre-pandemic levels once inflation is under control. The Bank of England is expected to start cutting its base rate in February 2024, followed by steep cuts until mid-2025. This will have a positive impact on long-term mortgage rates, which are expected to drop below 5% by the end of 2024.

    Share this post:
    Facebook
    Twitter
    Email
    WhatsApp
    Steve Roberts (MAQ)
    Steve Roberts (MAQ)

    Stephen Roberts MAQ is the founder of YesCanDo Money, one of the UK's largest no-fee mortgage brokers. With more than 30 years of hands-on experience in the mortgage industry, Steve really knows the ins and outs of mortgages. He's become a trusted expert and authority in the field, thanks to his deep understanding of the mortgage landscape. Speak to Steve or a member of his knowledgeable team today by completing our contact form:

    Contact Us

    Other Mortgage Insight Guides

    Halifax Takes Bold Step Towards Easier Home Access Through Shared Ownership

    In a significant move to make homeownership more accessible, Halifax has updated its shared ownership criteria. This policy change is aimed at opening the door ...
    Read More →

    A Surge in 35-Year and 40 Year Mortgage Terms

    2023’s financial landscape has witnessed a notable shift in mortgage trends. 35-year mortgages as well as 40-year mortgage terms are becoming more and more popular, ...
    Read More →

    HSBC Mortgage Cashback 2 & 5 year fixed rate deals

    Starting from April 18th, 2023, HSBC UK is giving away £300 cashback for customers who select either a 2-year or 5-year fixed-rate plan ranging from ...
    Read More →

    NatWest Mortgage Overpayment Increased

    NatWest Bank is revolutionising its mortgage policy with an impactful change that will benefit thousands of customers. From the beginning of March 2023, those who ...
    Read More →

    Halifax Unveils New 3-Year Remortgage Rates

    Halifax, a leading lender and a prominent name in the UK mortgage sector, has recently announced its innovative line-up of 3-year fixed-rate remortgage products. This ...
    Read More →

    Skipton launches No Deposit Mortgage: 100% Mortgage UK

    First-time homebuyers in the UK often find themselves in a catch-22 situation, with high rental costs preventing them from saving for a deposit. Skipton Building ...
    Read More →

    Halifax Introduces Competitive Sub-5% Five-Year Mortgage Rates

    In a significant move for homebuyers, Halifax Intermediaries has announced the launch of its new range of sub-5% five-year mortgage products, effective from November 15. ...
    Read More →

    Fastest Mortgage Lenders UK: 2023’s Speedy Leaders Analysed by YesCanDo Money

    In the dynamic UK property market, timing is everything. Securing a mortgage promptly can be the key to landing your dream home or missing out. ...
    Read More →

    Mortgage Payments 39% of First-Time Buyers’ Income

    Recent news that first-time buyer mortgage payments now account for two fifths of their income has sent shockwaves through the housing market, creating further dislocation ...
    Read More →

    UK’s 99% Mortgage Scheme: Key Impacts & Insights

    In a bold move to tackle the housing affordability crisis facing many Britons, the UK government, led by Prime Minister Rishi Sunak and Chancellor Jeremy ...
    Read More →
    Scroll to Top
    This website uses cookies to improve your experience. If you continue we’ll assume you’re happy. See our privacy policy for more information.