Over the last few weeks, we’ve seen several top UK lenders slash their mortgage interest rates, in an attempt to stimulate the housing market.
Many experts suggest that this could be the first signs of an economic upturn, house market recovery and further reductions in mortgage rates.
Whether this will indeed occur over the year ahead remains to be seen and depends on whether the Bank of England chooses to reduce its base rate when it’s next reviewed on 1st February 2024.
In this article, we’d like to answer a question we get asked all the time- will mortgage rates go down in 2024? We’ll also be sharing our mortgage rate predictions for 2024 and considering whether this will help stimulate the UK housing market.
What happened to mortgage rates in 2023?
Mortgage rates have been increasing over recent years.
Following Liz Truss’ mini-budget in September 2022, mortgage rates started to soar, reaching their highest point in 2023 and doubling repayments for many homeowners.
When the Bank of England decided to raise the base rate of interest to 5.25% in an attempt to tackle soaring inflation in August 2023 many people avoided taking out new mortgages because of the huge financial pressure and the uncertainty of the market.
Alongside the ongoing impact of Brexit, the soaring cost of living and global political unrest, many people struggled under the financial strain. They postponed buying a new home, waiting for mortgage rates to decrease again and causing a brief slump in the UK property market.
[Note: It’s important to mention that while the UK housing market did experience this decline, Bath, Bradford-on-Avon and Somerset didn’t experience the same slump because demand remained higher than supply.]
Why have mortgage rates already been reduced by mortgage lenders?
Thankfully, rates of inflation have started to fall over the past few months, dropping from 4.6% in October to 3.9%. This came as a relief for mortgage lenders who knew they needed to offer better deals to attract more customers.
Even though the Bank of England kept the base rate of interest at 5.25% when they carried out their review in December 2023, signs suggest that this could be reduced when reviewed again in February 2024.
Based on this belief, banks and building societies have decided to lend money for less than before, adjusting their mortgage products accordingly.
Will mortgage rates continue to decrease- Mortgage rate predictions for 2024
While mortgage rates have indeed dropped for several lenders, it’s hard to predict whether they will continue to decrease over the coming year, based on these changes.
It’s important to note that one of the lenders offering reduced rates, the Co-Operative Bank withdrew their new offer within just three days of its announcement so what happens remains to be seen.
Historically, mortgage rates do eventually decrease after a difficult financial period such as the one we’ve experienced over the past few years. While we can’t predict for sure that mortgage rates will continue to decrease, signs look positive.
Having said that, rates of inflation remain too high for the Bank of England, and they may not start reducing interest rates in their February review.
Despite this uncertainty, it looks likely that average mortgage rates will indeed fall over the course of 2024.
Here at Cobb Farr, we keep our finger on the pulse when it comes to housing market changes and believe that average mortgage rates should fall in 2024.
Will easing mortgage rates tempt more homebuyers?
Given the above factors, it’s likely that homeownership will become more affordable again, first-time buyers could enter the market and existing homeowners upgrade or invest in property.
If the potential buyer was postponing their purchase because of the high mortgage rates we experienced in 2023, they will be more likely to buy when the opportunity arises in 2024. It will also be easier to secure an affordable mortgage.
Furthermore, the increased demand will help homeowners to sell their properties faster and stimulate greater activity in the UK housing market. If this happens, it will be a better time than ever to buy or sell a property, especially in Bath, Bradford on Avon, Wiltshire or Somerset.
Despite the fact that we are still in the early throes of 2024, it looks likely that mortgage rates will continue to decrease as the rate of inflation continues to fall and other external factors ease.
Regardless, it’s crucial that home buyers and sellers stay informed about market trends, global conditions and government policies that could influence mortgage rates and monitor any changes announced by the Bank of England in February 2024.