NEWS: Are mortgage rates going down? [February 2024]

01-February-2024
01-February-2024 12:14
in News
by Sam Hodgson
Are mortgage rates going down

The Bank of England have held the base rate again at 5.25% in February for at least another 6 weeks, despite speculation of rates going down - but how long will that last?

In accordance with Prime Minister Rishi Sunak's pledge to cut inflation in half in 2023, the Bank of England has kept the base rate at 5.25% since September 21st.

After fourteen consecutive interest rate hikes throughout 2022 and 2023, the Bank of England can now boast a 4% inflation rate. Although this is still double the target of 2%, it's a considerable improvement.

The inflation rate reached its highest point in over 40 years in October 2022, at 11.1%. Since then, inflation has been gradually dropping.

While the Bank of England's overall target of 2% may seem ambitious, many do predict inflation to continue to drop. However, increasing interest rates further is putting pressure on thousands of homeowners to keep up with their already sky-high mortgage payments. 

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 less than two years ago.

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.

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What do the experts say?


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?

Carly Cheeseman

Carly Cheeseman

Head of International CeMAP CeRER

Firstly, interest rates have already significantly improved over the last 8-12 weeks, which is good news for borrowers.

But I’d expect the base rate to stay the same until around springtime next year, at which point we may see a reduction.

Any sooner than that and there could be uproar from the public. Many people fixed their mortgages around the 6% mark for 5 years – so seeing the base rate go back down so quickly after so many consecutive hikes would be a hard pill to swallow.

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George Abouzolof

George Abouzolof

Senior Finance Broker CeMAP

Yes, I think interest rates will go down over the next 12 months.

The best place to look is at the swap rates between banks - these are the rates at which banks borrow money from each other.

If swap rates go down, clients' rates tend to follow - and that's what we're seeing at the moment. 

In terms of 3-5 years? In my opinion, you can only really predict the short to medium-term.

The further ahead you try to predict something, the more variables come into play, and the less chance that you’re accurate for the right reasons.

Nobody foresaw Russia's invasion of Ukraine, for example, and that had a big effect on inflation and interest rates respectively.

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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.

Interest Rates

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 »

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 the relationship between inflation in the UK and the BoE's base interest rate:

Are mortgage rates going down

 

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.

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 
 
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.

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.

However, monthly increases in mortgage payments would have been more acute if your fixed rate mortgage ended and you automatically switched to your 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?

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Are mortgage rates going down now?

With political factors aiding stability – regarding mortgage rates – we are seeing reductions from lenders across the UK and an increase in affordable mortgage products on the market.

Many experts believe that rates will settle down now (although some disagree).

Rishi Sunak's appointment as Prime Minister and a drop in inflation has helped stabilise the economy and given mortgage lenders more confidence in offering lower rates to customers.

And this has been compounded by a housing price slump throughout 2023, causing lenders to get more competitive over the smaller mortgage demand – lowering results to attract business.

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:

How much can I borrow?

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 positivity on declining mortgage rates, it can be daunting and confusing to figure out the best option.

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.

Call us at Clifton Private Finance to find out what we can do for you:

0203 900 4322

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