Predicting mortgage rates in 2024 isn’t easy. After the challenges of 2023 rates had begun to fall and there is hope in the market that possible interest cuts later this year would then feed through to bigger mortgage rate cuts and an unleashing of the pent-up buyer and seller demand in the market, whether for residential mortgages, buy-to-let mortgages or first-time buyer mortgages.
Only it’s not quite that simple. With the spring budget and then a general election due at some point this year there are still some doubts about what might happen, which can leave buyers and sellers unsure whether it’s the right time to move or not. Here we look at what’s happening in greater detail to help you decide if the time is right for you:
The worst is over (hopefully!)
2023 was a challenging time, with mortgage rates hitting almost 6% at one point last summer. That pushed up monthly payments for homeowners and buyers, adding hundreds to their bills over the year.
The unwelcome rises were fuelled by the rapid increase in interest rates, which were raised 14 times in a row from December 2021. The Bank of England base rate went from record lows to the 16-year high of 5.25% where it has remained since October 2023.
A positive beginning to 2024
The beginning of 2024 looked positive. Lenders were encouraged by the Bank of England holding the base rate steady at 5.25%, something that has now happened for four months running and which had already led to mortgage lenders cutting rates for some time.
At the beginning of 2024, we saw some five-year fixed deals cut to below 4% - the first time in more than six months that they had been that low. Two-year fixed rate deals, meanwhile, were cut to below 4.5%. Chunky equity or deposits were necessary, however, with 40% equity required for those remortgaging, or the same percentage for a deposit for those buying.
But rates have crept up again in February
By February rates had started to creep up again, with Halifax increasing rates on some of its deals by 0.25 percentage points and NatWest by between 0.05 and 0.11 percentage points on a range of its two and five-year fixed deals for new customers. They followed similar changes by HSBC after swap rates – which influence the cost of mortgages – had also risen.
Interest rates cuts warning
The widespread expectations of interest rate cuts have been fuelled by the fact that holding the base rate steady seemed to have been working. The consumer prices index including housing (CPIH) inflation measure fell to 4.2%, its lowest rate in two years, in November and stayed at the same rate in December. That was more than half its October 2022 peak. The latest inflation update for January is due to be released on Valentine’s Day and will provide a clearer indicator.
However, in the latest interest rate decision Bank of England policymaker Jonathan Haskel was one of two rate-setters who had actually voted to raise interest rates again, proposing a rise from the current 5.25% to 5.5%.
In a subsequent interview with Reuters, he said that while signs were encouraging that inflation was falling he would need more evidence that it was working to beat “persistent inflation pressures” before supporting interest rate cuts.
Looking to the future
As we said earlier, predicting the future isn’t easy and people are unsurprisingly worried about affording their mortgage payments. The hope will still be that mortgage rates will fall but minor yo-yoing could continue for a while yet as mortgage rate lenders battle it out. The mortgage rate war isn’t over yet and keeping a close eye on mortgage rates and understanding your mortgage affordability will be key to a successful sale or purchase in 2024.
For more information on how we can assist you on your sales journey, please contact one of our branches in Essex, London or Hertfordshire today. We also offer a free and instant online valuation to give you an idea of how much your home could be worth on the current market.
