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NEWS: Are Mortgage Rates Going Down? [July 2024]
Inflation is at the BoE's target of 2%, but the base rate is held again in June at 5.25%, with 7-2 voting to hold the rate.
The next vote from the Bank of England will take place on 1st August.
A rate drop is certainly on the horizon, with Andrew Bailey stating:
We do need to see further progress, but I do want to give this message very strongly we have had very encouraging and good news, so I think you know we can say - we are on the way.
Whether we see this rate drop in August is speculative, but many think tanks and economists think it will be likely.
According to the Consumer Price Index, inflation is at 2.0%, in line with the Conservative government's target. While inflation hasn't dropped as quickly as many had hoped, there was speculation that the base rate would be lowered to ease pressure on mortgage repayments and to stimulate the economy, now that the 2% was achieved.
The inflation rate reached its highest point in over 40 years in October 2022, and after nearly two years of high interest rates, inflation has been gradually dropping.
As recently as December 2021, interest rates were at their record low of just 0.1%, meaning that the bank rate is now over 50 times higher than it was a year and a half ago.
Consistently stubborn inflation shows that there is still spending activity despite high interest rates, suggesting that the economy is still strong enough for people to be spending their cash rather than saving it. That being said, the latest inflation figures take the BoE to its target, making a rate drop all the more likely.
Keeping the Bank of England base rate at 5.25% means putting mortgaged households under continued financial strain amid the ongoing effects of the cost-of-living crisis.
Despite no recent changes to the base rate, there was a flurry of activity in the property market throughout the first half of 2024, and there is still optimism that rates will drop later this year. The market seems to be recovering - many first-time buyers and investors are buying despite high costs after holding off in 2023.
So what does this mean for mortgage rates and affordability going forward?
In this post, we provide expert insight into the latest thoughts from our mortgage brokers, along with insight into what caused interest rates to rise last year, what mortgage rates will do next, and how a decrease in mortgage rates could affect your repayments.
Related: Spring Budget 2024: 5 Key Property Market Takeaways
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What Caused Interest Rates to Rise Last Year?
How is The Mortgage Market Affected By Interest Rates?
What Mortgage Types Are Most Affected By Interest Rate Changes?
Are Mortgage Rates Going Down Now?
What Do Lower Mortgage Rates Mean for First Time Buyers?
How Can You Find an Affordable Mortgage in 2024?
What Do the Experts Say?
George Abouzolof
Senior Finance Broker CeMAP
Inflation now sits at 2%, exactly the target that the Bank of England has been trying to achieve since 2021. Many were expecting the most recent bank rate announcement to reveal a reduction, but this hasn’t been the case.
Many individuals are holding their breath until they see a significant change to interest rates, and it’s possible that the Bank of England is waiting for inflation to drop below 2% in case inflation jumps up again with a large influx of spending following any base rate reductions.
The next inflation figures will be announced on 17th July, and if inflation drops further, I highly expect rates to reduce.
Alex Chambers
Senior Private Client Adviser
With inflation forecast to continue falling, financial markets expect the Bank of England to cut rates to 4.75% by December 2024.
The economy is on the mend. It grew more than expected, by 0.6% in the first quarter of the year, meaning that we are no longer in a recession. According to Halifax, UK house prices also rose by 0.1% in April.”
And how about our readers?
Just 13% of participants believe interest rates will rise over the next 12 months, while 87% expect either a decrease or for rates to stay the same.
This sheds some light on the fixed or tracker mortgage debate for first-time buyers and those remortgaging in the next coming months.
This sheds some light on the fixed or tracker mortgage debate for first-time buyers and those remortgaging in the next coming months.
Read our full survey results »
How Will a General Election Affect The Economy?
On the same day that the latest inflation numbers were revealed, Prime Minister Rishi Sunak announced that a general election would be held on July 4, 2024. In his speech, he summarised his mission in parliament as one to "restore economic stability."
This, combined with having the election so soon after the June base rate announcement on the 20th of June, suggests that economic stability will be a key talking point in the lead-up to the election.
It is common for the economy to experience some volatility during elections and periods of political uncertainty. Businesses may delay investment decisions amid this instability, potentially slowing economic growth.
Issues raised during and after an election can sway consumer confidence, impacting spending and saving behaviour. Election outcomes can also shift expectations about inflation and interest rates, influencing borrowing costs and investment.
Furthermore, international perceptions of the UK economy, shaped by political stability and economic policies, can affect foreign investment and trade relations.
The overall impact of a general election on the UK economy hinges on the winning party's policies, post-election political stability, and businesses' and consumers' reactions to these changes.
Our Expert Says...
George Abouzolof
Senior Finance Broker CeMAP
It boils down to consumer confidence - if there is little to no perception of trust in a party’s leadership, this affects exchange rates and the economy's overall performance.
Choosing to announce the general election just after the inflation numbers were released was certainly a strategic move from Rishi Sunak, and the economy is likely to play a large role in this year’s election debates.
What Caused Interest Rates to Rise Last Year?
The Bank of England's monetary policy changes – steadily raising the base rate - is a measure to combat inflation.
Making borrowing more expensive stabilises inflation and slows the economy; with more people saving and spending less, price rises begin to slow.
However, 2023 saw the energy crisis continue and geo-political situations worsening – the ongoing war in Ukraine – which has further impacted the Bank of England's changes to interest rates.
All these factors added up to send interest rates through the roof.
The graph below helps to visualise what inflation has looked like through that past 12 months:
Source: Statista
As you can see, the base rate surge since 2021 has largely been a reaction to soaring inflation. And although we still have a way to go before the Bank of England reaches its goal of 2%, inflation is dropping gradually.
Related: Is Switching Lenders Really Worth It?
How is the Mortgage Market Affected By Interest Rates?
Here are 3 tables comparing some of the best mortgage rates available on the market from the past 12 months.
You can see how the mortgage market has changed over the last 12 months, and where the rates sit currently:
March 2022
|
Term
|
Product
|
Type
|
LTV
|
Rate
|
Subsequent Rate
|
Product Fee
|
ERC
|
|
2 years
|
Fixed
|
Purchase
|
60%
|
1.49%
|
4.9%
|
£999
|
Yes
|
|
5 years
|
Fixed
|
Remortgage
|
60%
|
1.89%
|
3.99%
|
£1495
|
Yes
|
|
10 years
|
Fixed
|
Remortgage
|
75%
|
2.46%
|
3.99%
|
£995
|
Yes
|
November 2022
|
Term
|
Product
|
Type
|
LTV
|
Rate
|
Subsequent Rate
|
Product Fee
|
ERC
|
|
2 years
|
Fixed
|
Purchase
|
60%
|
3.60%
|
6.49%
|
£999
|
Yes
|
|
5 years
|
Fixed
|
Remortgage
|
60%
|
4.83%
|
6.24%
|
£995
|
Yes
|
|
10 years
|
Fixed
|
Remortgage
|
75%
|
4.89%
|
5.5%
|
£995
|
Yes
|
March 2023
|
Term
|
Product
|
Type
|
LTV
|
Rate
|
Subsequent Rate
|
Product Fee
|
ERC
|
|
2 years
|
Fixed
|
Purchase
|
60%
|
4.14%
|
7.49%
|
£999
|
No
|
|
5 years
|
Fixed
|
Remortgage
|
60%
|
3.89%
|
7.49%
|
£999
|
Yes
|
|
10 years
|
Fixed
|
Remortgage
|
75%
|
4.04%
|
7.49%
|
£999
|
Yes
|
September 2023
|
Term
|
Product
|
Type
|
LTV
|
Rate
|
Subsequent Rate
|
Product Fee
|
ERC
|
|
2 years
|
Tracker
|
Purchase
|
60%
|
5.39%
|
8.4%
|
£999.00
|
No
|
|
5 years
|
Fixed
|
Remortgage
|
60%
|
5.12%
|
6.9%
|
£490.00
|
Yes
|
|
10 years
|
Fixed
|
Remortgage
|
75%
|
4.91%
|
6.2%
|
£999.00
|
Yes
|
March 2024
|
Term
|
Product
|
Type
|
LTV
|
Rate
|
Subsequent Rate
|
Product Fee
|
ERC
|
|
2 years
|
Tracker
|
Purchase
|
60%
|
4.44%
|
8.74%
|
£0
|
No
|
|
5 years
|
Fixed
|
Remortgage
|
60%
|
4.24%
|
7.99%
|
£490.00
|
Yes
|
|
10 years
|
Fixed
|
Remortgage
|
75%
|
4.63%
|
7.99%
|
£999.00
|
Yes
|
Source: Moneyfacts
When interest rates rise, it becomes more expensive for consumers to borrow money. Naturally, this includes mortgages. Higher interest rates have affected the housing market in a number of ways:
Lower demand - Higher interest rates can make mortgages less affordable for first time buyers, leading to lower demand for homes.
Reduced affordability – Rising rates also affect second property buyers and BTL investors. Their mortgage payments could go up, meaning they may need to raise rent to compensate. Or, their projected rent won't meet the affordability for a mortgage on a new investment property, so they don't buy, reducing demand.
Read blog: Moving To The South West From London
What Mortgage Types Are Most Affected By Interest Rate Changes?
If you have a mortgage with a variable interest rate – a rate that closely follows the Bank of England's base rate - you will have seen your mortgage costs go up throughout 2023.
However, if you're on a fixed-rate mortgage, you might have yet to see changes, depending on the length of your term. But you could still be stung when your deal ends and you do remortgage. Currently, many homeowners on the tail end of a low fixed-rate mortgage are waiting with bated breath in hopes that rates will drop before they remortgage to a new deal.
Other property owners are taking the hit and switching to a variable rate in hopes of switching to a cheaper deal later this year.
Monthly increases in mortgage payments have been more acute for those whose fixed-rate mortgages ended and they have automatically switched to their provider's SVR (standard variable rate) – these are typically the most expensive interest rates to pay.
If you're looking to remortgage in 2024, we recommend comparing fixed and tracker mortgages to see which may be more suitable to you and offer the best available deal.
And if you're currently on a very low rate and want to raise additional finance without remortgaging, a second charge mortgage could help you protect your current deal.
Related: What is a Green Mortgage, and how do they work?
Are Mortgage Rates Going Down Now?
At the beginning of 2024, we were seeing mortgage rates drop below 4% for the first time since the Autumn mini-budget. However, with inflation remaining relatively stubborn, mortgage providers have been pulling rates left and right.
Additionally, there's a certain level of political uncertainty surrounding a potential general election. This means that while the property market itself seems to be recovering from the instability that COVID-19 brought, mortgage products are chopping and changing and likely will stay like this until the base rate is reduced.
Last year, the demand for mortgages was lower, with many prospective buyers holding off until the market was more stable and many would-be buyers simply unable to afford homes amid the elevated costs. Because of this, lenders became more competitive over the smaller mortgage demand, lowering results to attract business.
Since January 2024, buyers have been entering the market with renewed confidence. Because of this, house prices are slowly beginning to pick up. While most mortgage deals are stuck between the 5% and 6% mark, there are some reasonable offers out there considering the circumstances. Overall, there is faith that we will see a bank rate drop later this year, with mortgage rates to follow.
Related: How bridging loans can help you plug a funding gap and secure your property.
Need a refresher on how much you can borrow? Use our mortgage calculator below:
What Are The Current Mortgage Rates?
Here's a table of current mortgage rates that we've recently secured for clients:
2 Year Tracker
Up To £5m
4.94% APR
2 Year Tracker
Subsequent rate 6.99%
LTV - 60%
APRC 8.4%*
Product Fee £999
Free standard valuation
Early redemption charges
As of 10th January 2024
5 Year Fixed
Up To £1.5m
3.89% APR
5 Year Fixed (Remortgage)
Subsequent rate 6.25%
LTV - 60%
APRC 6.1%*
Product Fee £999
Early redemption charges
As of 10th January 2024
2 Year Fixed
Up To £1.5m
4.44% APR
2 Year Fixed (Remortgage)
Subsequent rate 6.25%
LTV - 60%
APRC 6.1%*
Product Fee £999
Early redemption charges
As of 10th January 2024
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What Do Lower Mortgage Rates Mean for First Time Buyers?
With a potential decline in mortgage rates forecasted, it may be tempting to postpone plans until the lowest rates arrive – this may be true not just for first time buyers, but also those remortgaging.
However, a compromise could be securing a variable rate mortgage, so if rates do go down, you're not missing out.
One piece of positive news for first time buyers is the specialised mortgage products still available – deals tailored to first time buyers specifically - and lower house prices in affordable areas.
The best strategy is to consolidate your finances, understand your borrowing power, and seek a mortgage broker's help to find a deal that best product for you.
How Can You Find an Affordable Mortgage in 2024?
Despite current optimism about declining mortgage rates, deciding on the best option can be daunting and confusing.
We can help you compare mortgage products and their cost to find the best deal based on your specific situation from a wide range of lenders nationwide.
Related: What is a professional mortgage and can you get one?
Expert mortgage advisors have their finger on the pulse of the latest mortgage market news. Whether you're a first-time buyer or looking to refinance or invest in a BTL, we can help you understand your mortgage options so you feel confident you're making the right choice.
To see what we can do for you, give us a call at 0203 900 4322 or book a free consultation below.
