What is happening to mortgage interest rates?

UK mortgage experts seem to be discussing mortgage rates influenced by persistent inflation, economic stability efforts and global financial trends. Here’s what they’re saying and where they believe interest rates are headed:

Current Rates and Predictions for 2024:

• As of now, the Bank of England’s base rate is held at 5.25%. This has been the rate since mid-2023, reflecting ongoing efforts to manage inflation, which currently sits around 3.2%​ (Mortgageable)​​​.
• Predictions suggest that the base rate will likely remain at this level for most of 2024. However, if inflation continues to drop as expected, there may be cuts towards the end of the year, possibly bringing the base rate down to around 4.65%​ (Knight Frank)​​​

Mid- and Long-Term Outlook:

• By the end of 2025, forecasts indicate that the base rate could fall further, potentially stabilising around 3%​ (YesCanDo Money)​.
• Economists from institutions like Capital Economics and Goldman Sachs anticipate that the Bank of England will begin reducing rates in mid-2024, with steady cuts expected throughout the year​.

Impact on Mortgage Rates:

• Fixed mortgage rates have been relatively high but are expected to decrease gradually. For instance, five-year fixed rates, which peaked around 6.18%, are projected to drop below 4% by the end of 2024​.
• The current trend shows a preference shift towards two-year and three-year fixed rates over the longer five-year terms, as borrowers anticipate better rates in the near future​.

Market Sentiments and Strategies:

• Experts recommend that borrowers consider fixing their mortgage rates now to avoid potential future rate hikes, especially if their current deals are due to expire soon. Fixed-rate mortgages offer stability against fluctuating rates​ (Mortgageable)​​.
• There’s also a growing interest in tracker mortgages, which could offer flexibility with the potential to switch to fixed rates without penalties as the economic situation evolves​​.

Overall, while the immediate future sees stability in high rates, the long-term outlook appears more optimistic, with significant rate reductions expected from late 2024 into 2025. This could provide relief for many homeowners and new buyers in the UK mortgage market.

Got a question? Click here and reach out!