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HomeNews UKWill mortgage rates go down in 2024?

Will mortgage rates go down in 2024?

Mortgage rates have fallen significantly after their peak in the summer, with the Bank of England keeping its base rate unchanged since August. But the impact of high mortgage rates is still being felt, affects house prices. We explore where rates could head next.

While cheaper mortgages and falling house prices are good news for first-time buyers, interest rates remain historically high – and so do real estate prices. This means buyer demand and agreed sales still have some room to improve before recovering to levels a year ago.

The Bank of England has increased the base interest rate fourteen times in a row to curb rising inflation. This caused mortgage rates to spike significantly, although they have dropped slightly in recent months. The average two-year fixed interest rate is currently 6.02%. This marks a sharp increase compared to December 2021, when the figure was 2.34%.

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Read more: Can’t pay your mortgage? Here’s what you can do

Why are mortgage interest rates falling?

Mortgage interest rates rose sharply in 2022 and the first half of 2023, as the Bank of England raised its base rate from 0.1% to 5.25% to tackle soaring inflation. You can learn more about how interest rates affect inflation.

However, inflation is falling in the UK, which is making banks and building societies more confident in lending money to borrowers more cheaply.

Lenders anticipate Bank of England base rate moves by increasing or decreasing the price of their mortgage products accordingly.

With the Bank of England deciding to keep its base rate at 5.25% for a second time in November, it is likely that mortgage lenders have been calculating the likelihood of this decision happening.

Banks are also aware that the housing market is slowing, the number of people having difficulty repaying their loans is increasing, and very high interest rates are discouraging borrowers.

While house prices are falling, the average house price is still £40,000 higher than pre-pandemic levels. To attract customers, mortgage interest rates will need to fall.

Several big names and smaller lenders have cut interest rates, some more than once, since early August.

Read more: Five things to consider doing now if your fixed-rate mortgage is coming to an end

Will mortgage interest rates fall more?

Although inflation has fallen over the past year, it remains too high for the Bank of England. The annual inflation rate was at 4.6% in the year to October, more than double the Bank’s 2% target. This means the Bank of England may not have started cutting interest rates just yet.

However, experts generally believe that interest rates have peaked after the Bank of England decided to pause interest rate increases in September and November. Find out more about when interest rates may fall.

Mortgage rates have fallen since the summer. In July, the average two-year fixed rate rose as high as 6.86%. Today it is 6.02%.

If inflation continues to decline, industry insiders are optimistic that average mortgage rates could fall below 5% again by 2024.

What are the latest UK mortgage rates?

On December 6, average mortgage interest rates according to Moneyfacts were:

  • A two-year fixed deal is currently in place 6.02%
  • Five year fixed deal currently in place 5.63%

On December 1:

  • The standard variation rate (SVR) is 8.19%

The last time the average two-year fixed rate was much higher than the conventional five-year rate was in 2008.

We explore in more detail what’s behind the latest changes in mortgage interest rates.

Calculate how much you can overpay on your mortgage with this free tool

How have UK mortgage interest rates changed?

Earlier this year, average mortgage rates rose to their highest level since August 2008, during the financial crisis. The average two-year fixed interest rate back then was 6.94%.

In the years that followed, the economy stabilized and interest rates dropped like a stone. In December 2021, the average two-year fixed mortgage rate was 2.34%. Many deals are much cheaper than this. Some lenders offer interest rates below 1% for those with a large amount of money in their home or a large deposit.

The current five-year average rate is 5.77%, compared to 2.64% in December 2021.

However, after inflation soared and the Bank of England began to raise interest rates, mortgage rates also increased. Now that inflation has cooled somewhat, they have started to decline a bit.

You can see how mortgage rates have changed since June in the table below:

Day Average fixed interest rate for 2 years Medium Fixed interest rate for 5 years
June 16, 2023 5.98% 5.62%
June 23, 2023 6.19% ↑ 5.83% ↑
June 30, 2023 6.39% ↑ 5.96% ↑
July 7, 2023 6.54% ↑ 6.04% ↑
July 14, 2023 6.78% ↑ 6.30% ↑
July 19, 2023 6.81% ↑ 6.33% ↑
July 20, 2023 6.79% ↓ 6.31% ↓
July 26, 2023 6.86% ↑ 6.36% ↑
July 28, 2023 6.81% ↓ 6.34% ↓
January 8, 2023 6.85% ↑ 6.37% ↑
July 8, 2023 6.84% ↓ 6.35% ↓
August 17, 2023 6.76% ↓ 6.25% ↓
May 9, 2023 6.67% ↓ 6.17% ↓
September 13, 2023 6.62% ↓ 6.11% ↓
September 19, 2023 6.66% ↑ 6.08% ↓
September 28, 2023 6.48% ↓ 5.98% ↓
October 16, 2023 6.36% ↓ 5.91% ↓
September 11, 2023 6.21% ↓ 5.80% ↓
November 30, 2023 6.02% ↓ 5.63% ↓
Source: Moneyfacts

Are you looking for a mortgage? Use this free mortgage tool to see some of the best deals

Who can get a cheap mortgage?

The cheapest deals tend to target existing homeowners who want to move or remortgage and those with lots of equity or large deposits – usually around 40% of the property value.

An independent mortgage broker can help you find the cheapest deals on the market that suit your financial circumstances.

Here are other factors to consider:

  • The larger your deposit, the lower your mortgage rate (in general)
  • Five-year mortgage deals tend to have lower interest rates than shorter-term deals
  • Some deals are only available to borrowers in England and Wales
  • Your credit score must be in the best condition to ensure a good deal

You may want to read: Is now a good time to get a mortgage?

Which mortgage could be the cheapest mortgage for first-time buyers?

First-time buyers typically have a smaller deposit of 5% to 10% of the home’s value.

A small deposit can mean you are more limited in the number of trades available to you. If you find a suitable deal, the interest rate is likely to be higher if you have a larger deposit as the lender will view you as riskier.

We outline the pros and cons of small deposit mortgages.

You also need to consider any mortgage fees that come with the product. Some exchanges charge upfront or exit fees, while others do not.

Often, attractively low mortgage rates also come with top fees, which can make a big difference to the total amount you pay for your home.

Please note: there is no guarantee you will qualify for an advertised mortgage deal. Lenders often have strict eligibility criteria.

To find the best mortgage deal for you, check out our mortgage comparison tool*. This offers the best options whether you’re a first-time buyer, a mover, a buy-to-let homeowner or looking to remortgage.

If you’re looking for help getting on the property ladder, check out our guide for first-time buyers.

Is it worth talking to a mortgage broker?

It may be worth speaking to a mortgage broker as they will have access to a range of deals on the market.

Remember that some banks offer special offers to their existing customers that brokers may not have. So you may want to talk to your current bank or lender.

The good news is that you can secure a cheaper mortgage once you have built up more equity in your home.

Looking for a broker? We list the best mortgage brokers

Find mortgage deals with our best buying tool

Times Money Mentor has partnered with Koodoo Mortgage to create a mortgage comparison tool. You can use it to evaluate the deals you might get – but if you want advice, it’s best to talk to a mortgage broker.

Here’s how the tool works:

  • You can search and compare mortgage deals
  • It only takes a few minutes and requires no personal information to search
  • Once you get your results, you can speak to a mortgage broker if you need advice

Product information is provided on a non-consultative basis. This means that no advice is given or implied and you are solely responsible for deciding whether the product is suitable for your needs.

*All products, brands or properties mentioned in this article have been selected by our writers and editors based on first-hand experience or customer feedback and meet the standards they hold. I believe that readers expect. This article contains links from which we may earn revenue. This revenue helps us support this site’s content and continue to invest in our award-winning journalism. For more, see How we make money And Editorial promise

Important Information

Some products advertised are from our affiliate partners for which we receive compensation. While we aim to recommend some of the best products available, we cannot review every product on the market.

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