Will mortgage rates fall or rise in 2024?
Towards the end of 2023, average fixed mortgage rates were declining. And they continued declining at the very start of 2024, but whether they go up or down over the next few months is very difficult to predict.
In fact, several lenders have increased rates on selected mortgage products in March 2024, indicating that the market still remains very changeable. The changes have occurred despite the Bank of England base rate remaining stable since August 2023.
From the end of 2021 until August 2023, the Bank of England increased the base rate 14 times in a row to its current level of 5.25%. This was done to combat rising inflation, although this has recently come down to its lowest level in over two years (3.4%).
The Bank of England's Monetary Policy Committee is next set to make a decision about whether to increase the base rate on 9 May 2024, and many are wondering if, due to inflation having fallen, a reduction could be on the cards soon, which could mean lower mortgage rates.
However, it's impossible to say for sure what the Bank of England will decide. The most recent inflation announcement revealed it was down at 3.2%, the lowest in over two years. But it did not fall as much as was hoped by some, making it very difficult to know what they will decide.
It's important to note, changes to the base rate don't necessarily mean that mortgage rates will also change. While certain mortgage deals (tracker mortgages) have rates directly linked to the base rate, the rates on other types of mortgages are influenced by other factors in addition to the base rate, such as swap rates and the lender's discretion.
Swap rates have increased slightly recently with some lenders increasing their fixed mortgage rates as a result.
Unfortunately, recent volatility in mortgage deals means it's very hard to predict what will happen to mortgage rates over the next few months. But if you are due to remortgage, the average standard variable rate (which you're moved to after your current deal ends) is still above 8%, which is much higher than the average fixed mortgage rate.
This graph shows how fixed mortgage rates changed over the course of 2023 due to various factors. At the beginning of 2024, rates fell but have started to rise again in recent weeks.
Loan-to-value (LTV) is the amount you borrow for a mortgage as a percentage of the total value of the property
What should I do if mortgage rates rise?
If you're concerned about your mortgage interest rate rising, then you may want to consider:
Fixing your mortgage – this will keep your rate the same for a set period of time. If your current deal hasn't ended, however, make sure you're aware of any early repayment charges (ERCs)
Secure a new interest rate today – if you're due to remortgage within the next six months, you can lock in a new rate now and switch when your deal ends, avoiding an ERC. If rates fall before your deal ends, you can switch again to get a better option
What should I do if mortgage rates fall?
if you're worried that interest rates will fall after you've secured a mortgage, you could:
Opt for a shorter-term fixed-rate mortgage deal – this means you're locked into that rate for less time
Consider a variable-rate mortgage, such as a discount deal – but keep in mind that if rates rise, you'll end up with higher monthly repayments
