Mortgage rate forecast 2024: Will rates go down?
After falling for many months, the best mortgage rates on fixed deals are rising again. We look at the mortgage rate forecast for 2024 to see what might happen next.
Mortgage rate forecast for 2024: Will mortgage rates go down?
The mortgage rate forecast for 2024 is that rates are expected to go down, based on current predictions, although it may take longer than had previously been hoped. And there may be fluctuations as we’ve seen in February and March 2024 when fixed mortgage rates increased after many months of falling. But no-one knows for sure exactly what will happen with mortgage rates this year as it depends on multiple factors.
When will mortgage rates come down?
In March 2024, mortgage rates on fixed rate mortgages increased in the UK after falling for several months as the prospect faded of imminent Bank of England interest rate cuts.
On 21 March 2024, the Bank of England held the base rate at 5.25% for the fifth time in a row. Financial markets are currently predicting the first cut in interest rates will be in June 2024, falling to around 3% by the end of 2025, according to the latest forecasts from Capital Economics. As a general rule: if interest rates fall, the mortgage rate forecast would be for mortgage rates to fall too.
But any cuts in interest rates depend on factors such as what happens with inflation. While inflation has fallen during the last year, the annual inflation rate stood at 3.4% in March 2024, which is above the Bank of England’s 2% target.
Also, mortgage rates are still much higher than we’ve been used to in recent years. In March 2024, the average 2 year fixed rate is 5.76%. While this is a significant drop from its July 2023 peak of 6.86%, it’s still much higher than December 2021 when was 2.34%. Find out more in our guide to the Best mortgage rates.
Which lenders have increased mortgage rates?
In March 2024 the most recent mortgage rate hikes have come from lenders including HSBC UK, Santander, NatWest and Nationwide which have all announced mortgage rate increases in recent weeks. Stay up to date with the latest cut in our Best mortgage rates guide.
Why are mortgage rates fluctuating in the UK?
Mortgage rates rose sharply in 2022 in the UK after the Bank of England started hiking the base rate from 0.1% to tackle surging inflation. And mortgage rates shot up following former Prime Minister Liz Truss’s disastrous mini-budget in September 2022.
However, we had been seeing mortgage rates coming down for a number of months as inflation fell and as markets predicted the base rate has peaked and will fall in 2024. While at the start of 2024, fierce competition in the mortgage market also led to better mortgage rates being available to borrowers.
But in February and March 2024 we saw lenders hiking rates on fixed rate mortgages as the prospect faded of imminent Bank of England interest rate cuts.
Whenever mortgage rates are volatile it’s crucial to shop around for the best mortgage deal before your current mortgage deal ends. Noone knows how long deals will be around for so act fast when you find the deal you want to avoid the risk of missing out. You can then keep it under review with L&C’s Rate Check service to make sure you don’t miss out on a better mortgage rate before you need to switch.
It also means you’ll avoid your current deal rolling onto your lender’s Standard Variable Rate.
What are the latest UK mortgage rates?
On 20 March 2024, the average mortgage rates according to Rightmove are:
- Average 2 year fixed mortgage rate at 60% LTV was 4.69%
- Average 5 year fixed mortgage rate at 60% LTV was 4.37%
- Standard variable rate (SVR) is 8.17%
Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.
Is 2024 a good time to remortgage?
Whether or not 2024 is a good time to remortgage will depend on your circumstances. However, for many of us, the timing of when we need to remortgage is taken out of our hands. For example, if your cheap mortgage deal ends in 2024 and the option is to remortgage or let your mortgage roll onto your lender’s standard variable rate (these can be as high as nearly 10%) you may be able to save a lot by remortgaging, even if your monthly payments rise.
In fact, Financial Conduct Authority figures show that around 1.5 million homeowners’ fixed-rate mortgage deals will end in 2024. And the Bank of England has estimated around 5 million homeowners will see their monthly mortgage payments rise between now and 2026.
So if your current mortgage deal ends in the next six months you should start the remortgage process now to lock in a rate. You can then use L&C’s online mortgage finder Rate Check service to see if there are any better options you could swap onto before your current deal ends.
And if you’re currently on your lender’s standard variable rate, you should urgently review your remortgage options because typical SVR rates are significantly higher than the best remortgage deals available.
What do current mortgage rates mean for remortgaging in 2024?
Rising mortgage rates during 2023 seems to have led more borrowers to remortgage with their existing lender; data from UK Finance, the trade body which represents the banks, shows product transfers increased by 11% 2023. There are certain benefits to the borrower of taking out a product transfer, such as not usually needing to go through an affordability assessment.
But if you’re remortgaging, don’t just opt for a product transfer without seeing what your other options are as you might not end up on the best deal. Speak to a fee-free mortgage broker and they’ll find the best deal for your circumstances.
Mortgage rate forecast 2025 – will rates go down?
In terms of a mortgage rate forecast, UK Finance said in its latest housing and mortgage market forecasts for 2024 and 2025, ‘While it will take some time for the pressure on household finances to recede, we expect things to begin to look up in 2025.’
What are the UK mortgage rate predictions for the next 5 years?
While it’s not possible to make accurate UK mortgage rate predictions for the next 5 years, the Office for Budget Responsibility has forecast that mortgage rates on average are expected to rise from a low of 2% in 2021 to a peak of 5% in 2027 across all properties.
Mortgage rate forecast – how much will I pay?
Here’s an illustration of how your mortgage payments may increase if you’re coming off a cheap fixed deal.
We compare what you’d pay on a cheap 2% fixed deal with what you’ll pay at 5.76%, the average 2 year fixed rate mortgage*, based on a 25 year term.
You can use our mortgage cost calculator to see the impact of different rate changes.
| Mortgage balance | 2% mortgage rate | 5.76% mortgage rate* |
| £100,000 | £424 | £630 |
| £150,000 | £636 | £945 |
| £200,000 | £848 | £1,259 |
| £250,000 | £1,060 | £1,574 |
| £300,000 | £1,272 | £1,889 |
| £350,000 | £1,483 | £2,204 |
| £400,000 | £1,695 | £2,519 |
*Figures from 12 March 2024 for the average 2 year fixed rate mortgage, according to Moneyfacts.
What does this mortgage rate forecast mean for first time buyers?
The current mortgage rate forecast predicts that rates may improve during 2024, however this isn’t guaranteed. But while you can’t control mortgage rates lenders set, you can get yourself in the best possible position.
So as well as sorting your budget and improving your credit score, save as big a deposit as possible. A Lifetime ISA could give you a major boost. And make sure you know how much you can afford to borrow on a mortgage. Read our guide on How much can I afford to borrow on a mortgage? Find out the cheapest mortgage rates whatever your deposit size (40% to 0%) in our guide to the Best first time buyer mortgage rates
What’s the house price forecast for 2024?
HomeOwners Alliance which has been tracking house prices of the major indices in its monthly House Price Watch for the last ten years expects house prices to fall a further 1% in 2024. Find out more in our UK house price forecast guide.
Who can get the cheapest mortgage rates?
These factors can help determine whether you’ll get access to cheapest mortgage rates:
- Size of deposit: The cheapest mortgage rates are usually available to people with a big deposit – usually around 40% of the property’s value.
- Good credit rating: The cheapest mortgage rates are also usually available to people with a good credit rating. If your credit score is less than perfect, read our guide 11 tips to improve your credit score for a mortgage for advice on how to boost it.
- Length of deal: The rate you’ll pay will also depend on how long you take your mortgage deal out for.
- Fixed vs variable mortgage rates: In March 2024, the cheapest mortgage rates are available as fixed rate mortgages. However, if you take out a fixed rate mortgage, the rate you pay will be the same for the duration of the term. While the cheapest variable rate mortgages may be higher in March 2024, the rate you pay may reduce (although it may increase). Find out more in our guide What type of mortgage should I get?
Is it worth speaking to a mortgage broker?
Yes, it’s always worth speaking to a mortgage broker. Not only will they be able to explain your options to you but they may also have access to exclusive deals too. But beware, some brokers charge fees. So speak to a fee-free broker like our partners at L&C.
What this mortgage rate forecast means if you’re on a cheap deal
If you’re currently on a cheap fixed rate mortgage, this mortgage rate forecast may understandably make you feel quite anxious because even if rates continue to fall, you’ll likely have to pay a higher rate on your next mortgage. If you can, take advantage of the low rate you’re currently on and make overpayments. Overpaying will help to drive down the mortgage more quickly, which will mean a smaller mortgage balance when you remortgage onto a new deal. But make sure to check if your mortgage allows overpayments (most do) and also check if there are limits on how much you can overpay by to avoid having to pay an early repayment charge.
If you’re worried about cost of rising mortgage rates
If you’re struggling to pay your mortgage you should contact your lender as soon as possible. Depending on your circumstances the lender may offer a range of options such as reducing the amount you pay for a short period of time. Take a look at our guide on the 7 ways to reduce your monthly mortgage payments. You can also get free money advice from various charities and organisations including Citizens Advice and Step Change Debt Charity.
Are you a mortgage prisoner?
The most vulnerable borrowers are those that do not have the opportunity to shop around for a better mortgage deal in the face of increased mortgage costs.
Mortgage prisoners are borrowers who took out high-interest home loans with lenders such as Northern Rock, which collapsed during the 2008 financial crash.
Their mortgages have since been sold on to other providers, who do not offer new mortgages, so remortgaging with them is not possible. And mortgage prisoners could be facing rates of 9% and above in the current economic climate. Issues including negative equity, having an interest-only mortgage, missed payments or changes in circumstances have prevented people from switching to a different lender despite interventions from the FCA.
According to the FCA’s Mortgage Prisoner Review, published in November 2021, there were about 195,000 households whose debts had been sold on to inactive lenders. And it estimated 47,000 of these households could save money if they were allowed to switch to a new deal.
However, despite changes that have made it easier for banks to offer these borrowers mortgages at a lower rate, the FCA found that customer demand and lender supply has been low.
If you find you can’t pay your mortgage, see our guide on what to do.
Frequently asked questions
What is the base rate and why does it matter?
The Bank of England sets the base rate and it’s important to homeowners because it acts as a benchmark for the cost of borrowing money. In theory the lower the base rate, the lower mortgage rates. And if the base rate rises, we’ll usually see mortgage interest rates rise too.
What is the current UK interest rate?
The current Bank of England base rate is 5.25% in March 2024.
How do interest rates affect monthly mortgage payments?
When the Bank of England increases the base rate, the amount it will cost you will depend on what type of mortgage you have:
Fixed rate mortgages: If interest rates go up – or down – your monthly payments will stay the same.
Tracker mortgages: The rate you’ll pay is linked to the base rate – if interest rates go up you’ll pay more and vice versa.
Discounted variable rate: These works like trackers, except instead of tracking the base rate, it tracks the lender’s own SVR at a discounted rate.
Standard Variable Rate: This means you’re paying a rate set by your lender. Standard variable rates can be very expensive so it’s important to find out if you can save on your mortgage by remortgaging onto a new deal.
How much is the average standard variable rate?
The average SVR in March 2024 is 8.17%. However, SVRs vary widely by lender. For example Newcastle Building Society’s SVR is currently 6.94% while Aldermore’s SVR is 9.73%.
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