Last year we saw continued turbulence in the mortgage market, with rates reaching their highest point in 15 years. This was largely due to a spike in inflation, which reached double figures for much of the year. To try to get a hold on inflation, the Bank of England decided to increase the base rate multiple times, reaching a peak of 5.25% – a considerable increase from the record low of 0.1% in 2021.
As we start 2024, the base rate is still at 5.25%, so what does that mean for mortgage rates this year? Will mortgage rates come down in 2024? Will they stay the same or even increase? In this guide, we’ll take a look at some possible outcomes and predictions for mortgage rates this year.
What Affects Mortgage Rates in the UK?
There are a number of factors that influence mortgage rates in the UK, and having a basic understanding of these factors can help us make predictions about what may happen to rates in the future. Let’s have a look at the main factors that influence mortgage rates in the UK.
- Base Rate. The base rate is set by the Bank of England and is used to try and control inflation or boost the economy.
- Swap Rates. Swap rates are generally set by financial institutions and they are based on industry predictions about future interest rates.
- Inflation. Inflation figures are a representation of the changing cost of goods and services. They indirectly affect mortgage rates by influencing the base rate.
- Property Market. The state of the property market has a direct influence on mortgage rates as lenders may decide to be more or less competitive depending on housing demand.
What’s Happening to Mortgage Rates at the Moment?
Mortgage rates came down slightly in the latter half of 2023 and some lenders have slashed rates further at the beginning of 2024. One of the reasons for this downward trend is that inflation, which was above 10% in early 2023, decreased to 3.9% towards the end of 2023. This signalled to lenders that the Bank of England is unlikely to raise the base rate further, giving them the confidence to offer lower mortgage rates.
Another reason is that the UK property market is still relatively sluggish, so lenders need to stay competitive to get borrowers on to their books. All in all, although rates are still considerably higher than they were a few years ago, in the context of the last two years the situation has improved. To find out exactly what rates are available to you at the moment, please get in touch with us and we’ll search the market to see what your options are.
What’s Likely to Happen to Mortgage Rates in 2024?
Although inflation fell to 3.9% in November 2023, it rose again to 4% in December, meaning it is still double the Bank of England’s target of 2%. This suggests that the base rate is unlikely to come down any time soon. That being said, most experts agree that the peak in mortgage rates has been and gone, providing nothing major throws us off track again.
Although it’s impossible to predict exactly what will happen to mortgage rates in 2024, rates are expected to drop further, but not at the same rate we’ve seen in recent weeks. There are also whispers in the industry that swap rates could rise again, which means that mortgage rates could be vulnerable to increasing at some point in the near future. All in all, these predictions suggest that now may be a good time to see what deals are available to you if you need to get a mortgage or remortgage in the next 6 months. Let’s explore why in the next section.
Should I Remortgage or Wait for Mortgage Rates to Come Down?
Although mortgage rates may decrease slightly this year, there’s no guarantee this will be the case. In fact, we can’t know for certain that rates won’t increase again. It’s therefore not advisable to wait for mortgage rates to come down, especially if you’re approaching the end of your fixed-rate period. If you don’t remortgage, your lender will move you onto their higher Standard Variable Rate, which is usually the highest rate you can be on. This means you’ll be paying far more than you need to each month, which would have the opposite effect of what you were trying to achieve by holding out for rates to come down.
The good news is that you may be able to have the best of both worlds. If you’re within 6 months of the end of your fixed-rate period, we should be able to secure you a suitable deal at today’s rates, and then switch you to a better deal if rates do come down. This means you can benefit from the drop in rates in recent months, protect yourself from the risk of rates rising again in the months ahead, and take advantage of lower rates in the future if they become available. To find out more about this option, book a chat with one of our friendly advisors today.
The Bottom Line
With the mortgage market still being in a relatively volatile state as we enter 2024, it’s recommended that you speak to a mortgage advisor as soon as possible to see what your options are. Rates have dropped in recent months due to a drop in inflation and an increase in competition between lenders, so you may be able to secure a deal you’re happy with. Rates may fall slightly further through the year, but it’s unlikely to be by much and there’s no guarantee that external factors won’t push them back up. For this reason, if you’re approaching the end of your fixed-rate period in the next 6 months, we recommend you lock in a deal at today’s rates. If a lower rate becomes available to you, we’ll let you know and switch you to the better deal without you having to do anything. And if rates were to rise again, you’d be able to benefit from today’s lower rates as you’d already have an agreement in place with your lender.
At Michael Usher Mortgage Services, we’ve been helping our local community for over 30 years! We’re not affiliated with any particular lender, so we can access a comprehensive range of mortgages from across the market to find a deal that suits your needs. We’ll guide you through the process and liaise with your lender, estate agent and solicitor to ensure your application goes as smoothly as possible, and we can also help to protect your mortgage with our FREE Insurance Service.
Talk to one of our friendly mortgage advisors for free to get going quickly. Our head office is on Frimley High Street, but we can also help you remotely via phone or video call if you’d prefer. We look forward to chatting with you!
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