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

12-April-2024

12-April-2024 15:18

in News

by Sam Hodgson

The Bank of England have held the base rate again at 5.25% in March 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 fifteen consecutive interest rate hikes throughout 2022 and 2023, the Bank of England can now boast a 3.4% inflation rate. Although this is still above 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?

George Abouzolof

Senior Finance Broker CeMAP

BoE have held their nerve and kept base at 5.25% for the 5^th time in a row, even though CPI is at 3.4%. Their inflation target is +/- 1% of which we are on the verge of achieving.

Swap rates are on a downward trend too, so we’d expect to see this feed through into lower fixed rate deals soon.

Hopefully, the BoE have learnt from their ultra-low base rate days (circa 0.1%). What they don’t want to do is starve inflation to the point where base rate reductions make little to no difference (known as the zero lower bound of effectiveness).

The next BoE meeting is on the 9^th of May, if I were a betting man, I’d suggest we may see the 1^st base rate reduction then, assuming CPI has fallen within the target range of which we will know on the 17^th of April.

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Jonathan Kelly

Mortgage Broker

It’s clear the Bank of England is leaning towards dropping the base rate this year. Most recently, the Monetary Policy Committee voted 8-1, with the majority opting for a pause and the one supporting a decrease. In the previous Bank of England announcement, the committee was split three ways, with two members voting for an increase.

Alongside the inflation rate dropping this year, it looks promising that there will be a reduction at the next review. However, how far and how quickly the base rate falls will be up for debate.

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

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.

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.

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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:

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

More info »

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

More info »

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

More info »

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.

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: