Mortgage rate predictions 2024: Will rates keep falling?

Mortgage rates in the UK have fallen significantly in recent months but could mortgage rates be set to rise? We look at what’s happening now and the longer term mortgage rate predictions to help you decide what to do with your mortgage.

Angela Kerr Director, Editor

Mortgage rate predictions November 2024: Will rates keep falling?

Mortgage rates on fixed deals in November 2024 may be set to rise, despite the Bank of England’s decision to cut interest rates for a second time this year. While lenders had been slashing mortgage rates since the Bank of England finally cut the base rate in August 2024, in the aftermath of the October 2024 budget, the expectation that interest rates may have to remain a little higher for longer than previously anticipated is pushing up costs for lenders.

Lenders including Skipton Building Society and Coventry Building Society have both announced fixed rate increases.

David Hollingworth at L&C Mortgages said on 1st November, ‘It’s confusing times for mortgage borrowers when expectation is for a base rate cut next week but fixed rates look set to rise. If market rates remain at current levels, it looks inevitable that more lenders will have to rethink their rates.’

He explained that while this isn’t the ‘radical spike in rates that have blighted mortgage rates’ in the last couple of years, the sub 4% 5 year fixed rate deals that have come on the market in the last few months could be ‘under threat’.

So the clear message is, don’t hang around if you’re looking for a new mortgage. You should move quickly to secure a deal as some rates are being withdrawn with very little notice.

How can I secure the best mortgage rate in the current market?

Mortgage borrowers who had been waiting for lower rates to emerge are being urged to lock into a deal now in case the best deals disappear.

If you’ve got up to 6 months before your current mortgage deal ends you can act now. Speak to fee-free mortgage brokers L&C, they’ll scour the market to find you the best deal. You can lock in a rate now in case rates do rise, and sit back knowing their brokers will keep your mortgage under review. This way, you won’t miss out on a better mortgage rate before you need to switch. While other brokers charge for checking you’re rate is still the best one on offer, this is all part of L&Cs fee-free service.

By starting the remortgage process early, you’ll also avoid accidentally falling onto your lender’s expensive Standard Variable Rate.

Get fee free, no-obligation mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

How much further could interest rates fall in 2024?

Markets widely predicted that interest rates would be cut from 5% to 4.75% on 7 November. However, experts are divided on whether there’ll be an additional interest rate cut in December.

Looking ahead to 2025, Capital Economics’ research suggests that interest rates will go down to 4% by the end of next year. While Goldman Sachs forecasts interest rates coming down as low as 3% in November 2025.

However, any further cuts in interest rates depend on factors such as what happens with inflation. As we continue through 2024 and into 2025 you can keep up to date by bookmarking our guide to best mortgage rates in the UK or signing up to our weekly newsletter.

KEY INFORMATION

How do changes in interest rates affect your mortgage?

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. As a general rule, if interest rates fall, mortgage rates will fall too. Here’s how it could affect you:

• Taking out a mortgage: If you’re shopping around for a new mortgage or want to remortgage, the mortgage rates available should improve if interest rates fall, although this isn’t guaranteed.
• Tracker mortgages: If you’re in the middle of a tracker mortgage deal and interest rates are cut, your mortgage payments will fall as the rate you pay in your mortgage rises and falls in line with the base rate.
• Discounted variable rate: While if you’re on a discounted variable rate, you’ll pay a rate that’s lower than the lender’s Standard Variable Rate. If your lender decides to pass on the cut in interest rates, your mortgage payments will fall. But it won’t necessarily pass on all or any of the cut.
• Standard variable rate: If you’re on your lender’s standard variable rate, if your lender decides to reduce its SVR if interest rates fall, the amount you’ll pay will fall. But again, the lender may not pass on all or any of an interest rate cut. And if you are on your lender’s standard variable rate, you should know these rates can be extremely expensive, so check your deal now to see if you can save by remortgaging.

Which lenders have increased mortgage rates?

In November 2024, lenders including Skipton Building Society and Coventry Building Society announced increases to fixed rate mortgage deals. However, we have seen some mortgage rates cuts too. For example, Santander has cut rates on residential, new build mortgages and Buy to Let mortgages. But no one knows how long the best mortgage rates will be around for, so act fast in case they disappear. Stay up to date with our Best mortgage rates guide.

What are the latest UK mortgage rates?

On 2^nd November 2024, the average mortgage rates according to Rightmove are:

• Average 2 year fixed mortgage rate at 60% LTV was 4.16%
• Average 5 year fixed mortgage rate at 60% LTV was 4.05%
• Average Standard variable rate (SVR) is 7.99%

Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

Why have mortgage rates fluctuated 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, mortgage rates fell in 2023 as inflation fell and as markets predicted the base rate had peaked and would 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 the months that followed, lenders hiked fixed rate mortgages in response to the expectation that interest rate cuts would be slower and fewer than had previously been predicted. Then in June 2024, with better than expected inflation figures, and an expectation the Bank of England would reduce the base rate over the summer, some lenders started to nudge down rates.

And following August’s base rate cut from 5.25% to 5%, mortgage lenders started slashing rates on fixed deals. However, experts warned in November 2024 that despite the Bank of England’s decision to cut interest rates again, mortgage rates on fixed deals may increase. However, no one knows for sure what will happen with mortgage rates.

Is 2024 a good time to remortgage?

Yes, 2024 is a good time to remortgage, broadly speaking. But whether or not 2024 is a good time for you to remortgage will depend on your personal circumstances. 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 – and with experts warning that mortgage rates on fixed deals may be set to rise, you should act fast in case the best deals disappear. You can lock in a rate 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.

Get fee-free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

Will mortgage rates go down further in 2025?

No one really knows, but the mortgage rate predictions for 2025 is that rates will go down further in the UK, based on current predictions of what’s expected to happen with interest rates. As we explain above, as a general rule: if interest rates fall, the mortgage rate prediction would be for mortgage rates to fall too. However, whether or not this happens will depend on other factors such as what happens with inflation.

What are the UK mortgage rate predictions for the next 5 years?

The Office for Budget Responsibility‘s most recent forecast in October 2024 was that average interest rates on the stock of mortgages are expected to rise from a low of 2% in 2021 to a peak of 4.5% in 2027 across all properties.

This increase is due to more households coming off cheap fixed rate deals and needing to move onto more expensive rates. However, this mortgage rate prediction is 0.3% higher than the OBR’s prediction in March 2024. It says this is ‘driven by our higher forecast for Bank Rate’.

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 each month on a cheap 2% fixed deal with what you’ll pay each month at 4.16%, the current 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 for your situation.

Should I get a fixed mortgage or a tracker?

Choosing between a fixed mortgage, where you’ll pay a fixed rate for a set length or time, or a tracker mortgage where the amount you’ll pay will go up and down in line with the base rate, may seem a tricky decision. You may also consider a discounted mortgage, this will track under the lender’s standard variable rate.

In November 2024, generally speaking if you’re looking for a 5 year variable rate deal, you’ll pay more initially than you would on a fixed deal in the hope that you’ll end up paying less overall if interest rates fall in the future.

• For example, in November 2024, the best 5 year fix is from AIB at 3.79% (max LTV 60%, scheme fees £200) If you took out a £200,000 mortgage on this deal, your monthly repayments would be £1,033 throughout the 5 year term.
• By comparison, in November 2024, the best 5 year variable rate is Barclays’ Base + 0.60% which has an initial rate of 5.6%. (max LTV 60%, scheme fees £999.) If you borrow £200,000, your initial monthly repayments would be £1,139.
• If interest rates fall from 5% to 4%, you would pay a rate of 4.6% on the variable rate mortgage which would mean your monthly payments would be £1,123 (still higher than the fixed rate deal above). But if interest rates fall to 3%, you would pay a rate of 3.6%, this would mean you would pay a lower rate than the fixed deal.

However, there’s a middle ground you may want to consider. With some trackers, you can leave penalty-free during the term which means you could swap to a better deal if mortgage rates improve. But when it comes to your mortgage you need to consider what’s best for your individual circumstances. So speak to a fee-free broker so they can explain your options and find the best mortgage deal for you.

Get fee free mortgage advice from our partners at L&C. Use the online mortgage finder or speak to an advisor today.

Should I remortgage with a different lender?

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.

What does this mortgage rate prediction mean for first time buyers?

If the mortgage rate predictions are correct and mortgage rates could be about to increase, you may want to move quickly to snap up the best rates if you can in case they disappear.

However, bear in mind the best mortgage rates are for those with the biggest deposits. So while it’s easier said than done, you’re more likely to get a better rate if you can save as big a deposit as possible. A Lifetime ISA could give you a major boost. And do whatever else you can to get yourself in the best possible position including sorting your budget and improving your credit score.

Also, 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

Use our calculators to see how much you can afford, how much the mortgage will cost you monthly and more.

What’s the house price forecast for 2024?

Here at the HomeOwners Alliance we’ve been tracking house prices from the major indices in our monthly House Price Watch for the last ten years and expect house prices to increase 1%-2% in 2024. Find out more in our UK house price forecast guide.

What affects 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 November 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, 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.

It’s more important then ever to shop around for your mortgage so you’re ready to lock in the best rate. Get a fee-free mortgage expert at our partners L&C to do the hard work for you. They search over 90 lenders so you don’t have to – and it’s all free.

What these mortgage rate predictions mean if you’re on a cheap deal

If you’re currently on a cheap fixed rate mortgage, these mortgage rate predictions may understandably make you feel quite anxious because even though rates have fallen in recent months, you’ll likely have to pay a higher rate on your next mortgage.

For example, on 2nd November 2024, the average 2 year fixed mortgage rate was 4.90%. While this is a significant drop from its July 2023 peak of 6.86%, it’s still much higher than December 2021 when it was 2.34%.

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 higher 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.

Take a look at our online mortgage finder from L&C to see what mortgage deals you are eligible for from over 80 lenders 

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