Will Mortgage Rates Go Down in 2024?

Estimated reading time 7 minutes

2023 was certainly a year of uncertainty in the housing market with mortgage rates hitting highs not seen for quite some time. Since the summer 2023 spike, there has been slow movement in a downward direction. Will it continue in 2024 and make home ownership a little more affordable?

We looked at the interest rates over 2023 and how they may pan out for 2024 and your property plans.

What are mortgage interest rates?

Mortgage interest rates are the fees charged by mortgage lenders to cover their costs of lending you the money to pay for your home. They are calculated based on the base rate as set by the Bank of England. Should the Bank of England decide that the base rate is 5%, the mortgage lender may add a percentage on top to cover their costs. This is then passed on to you and sees you with a mortgage rate of 6% for example.

The rate you are charged will vary based on a few key factors:

  • How much you borrow
  • The type of mortgage you have
  • The lender
  • How much deposit you have

In some cases, the banks set their own base rate, which is like that set by the Bank of England, and then add their percentage on top. Natwest, for example, offers their tracker mortgage following the base rates that they have established and not those of the Bank of England.

Why have mortgage rates been high in 2023?

Mortgage rates have been on a spectacular surge since late 2021 when the Bank of England raised the base rate from 0.1% to 0.25%. Since then, the base bate rate has increased twelve times settling at the 5.25% we see at present, the highest figure since 2008.

This has presented mortgage lenders with increasing costs, which, much like in any industry, get passed on to the customer. This means a mortgage in 2021 that had a rate of around 2% is now at 6% or more.

Why has the base rate risen so much?

The base rate was reduced to a low 0.1% when the Covid pandemic was at its peak. The aim being to help the economy when it was at its most vulnerable. Thanks to global issues such as the war in Ukraine, and dare we say it, Brexit, among other things, inflation has gradually been skyrocketing, causing things to cost much more than normal. The increased costs of energy and goods needed to be curbed to help make them more affordable. Pushing up the base rate is one way to try and do this. Raising the interest rates when inflation is high aims to lower the demand on the economy, making borrowing and purchasing more expensive. Then, normally over two years according to the Bank of England, inflation comes down and stays low. That’s when the brakes can be put on interest rises.

Thankfully, inflation may have seen its peak, that’s not to say there won’t be more sudden rises but the 11% of 2021 and the 7% of August 2023 seem to have passed. At the time of writing, core inflation had dropped to 5.7%. As inflation drops and the economy naturally grows, interest rates will begin to either fall or at least stabilise.

How much have mortgages risen?

The figures for fixed-term mortgages are at their highest levels since 2008. Back then it was at almost 7% for a 2-year deal. We are relatively close to that figure with 6-7% rates common, but with the gap widening every month, there is positivity that it will keep on the downward path for a while to come.

If you remember, we mentioned December 2021 earlier. This was when the base rates were starting their run of increases. At this time a fixed-rate mortgage was available for just over 2% for the 2-year option, and just over 2.5% for the 5-year. Compare this to today, and you see those are more than doubled in many cases.

Will my mortgage be cheaper in 2024?

Current predictions state that the base rate will creep up to 5.5% or even as high as 6% by the end of 2023 as the Bank of England aims to keep inflation under control and bring it closer to the 2% pledged by the government. For some, this means further rises in mortgage payments, and an increased struggle to get on the property ladder for a first-time buyer.

With the base rate staying at 5.25% for a few months though, there are signs of encouragement. As inflation continues to reach closer to its target, many lenders are seeking opportunities to reinvigorate the property market. With more confidence in the way inflation is heading and in turn anticipating a fall in mortgage rates, some lenders are beginning to cut their rates allowing homeowners to borrow at a cheaper price.

Many experts are claiming that if inflation does continue to fall there is a chance that mortgage rates could fall under 5% in 2024. However, this is by no means a guarantee. Should it happen and inflation fall further, heading through 2024 could see property become much more affordable.

We are still some way off from reaching those lower rates enjoyed before those 2021 base rate increases though.

Mortgage rates, as we write this in November 2023, are at their lowest since June of the same year, encouraging many to see light at the end of the tunnel. Much depends on what kind of mortgage you have though.

Data from a recent Forbes article illustrates that fixed-rate mortgages ranging from 2-5 years are averaging a rate of 5.02% for the 5-year term and 5.32% for the 2-year offer.

2-year tracker mortgages – the mortgage rate that moves as base rates do – are currently averaging 5.66%.

The standard variable rate is coming in at a huge 7.75%, some 3% higher than it was in July 2022.

So, this could mean a few things, if you are on a fixed term, you will be able to enjoy that rate for the remainder of its duration and if at its conclusion, rates are even lower, you will be able to take a new offer significantly cheaper than the one you’d been on. If you are on a tracker, you may be able to benefit from the slow-falling rates and not be locked into a deal with high rates as long as they keep falling.

How can I get a cheaper mortgage in 2024?

Unfortunately for some, the cheapest deals won’t be available. They tend to target existing homeowners. However, if you have saved a substantial deposit, you could also find yourself eligible for better offers. 

Lenders take into account your credit score, your employment status and whether you are looking for a longer- or shorter-term deal. Those spread over a longer period tend to offer more competitive rates than the shorter deals, however, if rates fall significantly, you will be tied into a higher rate when other people are paying much less to borrow the same amount of money. It is always best to seek the advice of a mortgage advisor at this stage.

Escaping a costly mortgage can be achieved by a quick house sale. You can then downsize for a more affordable property or take advantage of the slowly decreasing rates and use the funds from your sale to put down a better deposit and secure the lowest mortgage rates. Gaffsy can help you do this. As cash house buyers, we have funds readily available to purchase any property, no matter its location, size, or condition. When you want to sell your home fast speak to our team. They will make an offer on any property, and should you accept it, you can have the house sold and the funds in your account in just seven days. Speak to the quick sale experts at Gaffsy today.

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