Will mortgage rates go down in 2024?

Mortgage rates have risen significantly over the past few years, resulting in increasing repayments for many people across the UK.

With the General Election over and inflation back to 2%, many borrowers are likely wondering if mortgage interest rates could fall soon. It’s impossible to predict for certain, but we round up the latest data and trends below to show what’s been happening with rates so far in 2024. 

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Last updated by Claire Flynn on 19 July 2024

When will mortgage rates go down? 

It’s difficult to know what will happen to mortgage rates in the second half of 2024 and when or even if they will fall. 

At the start of the year, fixed mortgage rates were generally falling. A few deals with rates lower than 4% appeared on the market. 

But this was relatively short-lived and several lenders increased rates throughout the spring, although there were some reductions at certain points too. 

This volatility continued in June in the lead up to the General Election, with lenders initially increasing rates but several have now reduced them on selected products, including Barclays, HSBC, Natwest and Halifax. 

With Labour now at the helm, many will wonder what the impact of the election result on mortgage rates will be. But recent increases and reductions make it very hard to predict mortgage rate trends over the upcoming months. 

The below table shows the average fixed mortgage rate for two-year and five-year fixed-rate mortgage deals for every month over the past year. These are based on our data of deals available from five of the biggest UK lenders (Santander, Nationwide, Natwest, Halifax and HSBC). 

Date

Average rate - 2 year fix

Average rate - 5 year fix

31 July 2023

6.5%

6.0%

31 August 2023

6.3%

5.7%

30 September 2023

5.9%

5.4%

31 October 2023

5.7%

5.3%

30 November 2023

5.4%

5.0%

31 December 2023

5.3%

4.9%

31 January 2024

4.9%

4.5%

29 February 2024

5.0%

4.6%

31 March 2024

5.0%

4.6%

30 April 2024

5.2%

4.7%

31 May 2024

5.2%

4.7%

30 June 2024

5.2%

4.7%

The above changes have occurred despite the base rate remaining at 5.25% since August 2023. This is because fixed mortgage rates are also influenced by swap rates, which have fluctuated based on market trends and expectations. 

In the past year, the lowest average rate for a two-year fixed mortgage was 4.9%, while the highest was 6.5%. For a £200,000 mortgage with a 25-year term, the predicted monthly mortgage payment would be £1,157 at a 4.9% rate, or £1,350 at a 6.5% rate.

This substantial difference of £193 per month highlights the importance of timing and thorough research when securing a mortgage.

The five-year fixed mortgage market has also experienced big changes, with average rates varying between 4.5% and 6.0%. Using the same mortgage example, this translates to a monthly payment range of £1,111 at the lower rate and £1,288 at the higher rate – a difference of £177 per month.

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Why are mortgage rates so high?

Towards the end of 2021, the Bank of England began to increase the base rate of interest. This was in order to combat rising inflation. It went from 0.1% to 5.25% in less than two years. 

The base rate is the Bank of England’s main lever to combat rising inflation, which they aim to keep at the government’s target of 2%. The idea is that by increasing interest rates, people will tend to save more and spend less, helping to keep inflation down. 

As the base rate increased, so did mortgage rates. Tracker mortgages often have rates that are directly linked to the base rate so these deals increased in costs alongside it. 

Other variable mortgages are often influenced by the base rate so discount and standard variable rates also increased. 

Fixed-rate mortgages have a set rate for a specified amount of time so those already on one weren’t affected. But the new fixed-rate mortgage deals available had higher rates than previously as the base rate increases influenced swap rates. 

Fixed-rate mortgages were also heavily impacted by the economic fallout caused by the September 2022 mini-Budget, with rates increasing significantly in a short space of time. They did fall a bit after that before rising again, and have been fairly changeable ever since then. 

Will the base rate fall in 2024? 

As mentioned above the base rate of interest does influence mortgage rates and is a major reason as to why they have increased so much over the past few years. So, many borrowers are likely hoping for a reduction in the base rate at some point in 2024. 

The inflation rate is now back down at 2% which is the . But the Bank of England also considers other factors when making a decision on the base rate, including wage inflation - this has fallen but still remains a little higher than hoped. 

At the most recent Monetary Policy Committee meeting (MPC), seven out of the nine committee members voted to hold the base rate at 5.25%. The other two voted to reduce the base rate by 0.25 percentage points. 

Some are forecasting the base rate to fall before the end of the year, with September looking more likely than August as the time for the earliest reduction.

But base rate forecasts have changed frequently in recent months as economic conditions have changed, making it impossible to say for sure. 

And even if the base rate does fall, while those on tracker rates will likely benefit from a fall in repayments, the impact on other variable deals and fixed-rate mortgages in the market is less easy to be sure of. Despite the base rate remaining the same since August, fixed-mortgage rates have changed a lot. 

Some may wonder if Labour winning the election could impact the base rate. But the Bank of England, while accountable to the government, has had parts of its operations made independent, meaning it should be free from political party influence.

So, a new Labour government shouldn't directly impact any base rate decisions - but any policies that impact the economy, and particularly inflation, may have an indirect influence on decisions.

Should I wait for rates to fall before getting a mortgage?

Whether now is the right time for you to get a new mortgage, either for a new property or an existing one, depends on your personal and financial circumstances. 

If you are due to remortgage soon, the average standard variable rate is still above 8% which is higher than most of the other fixed or variable deals on the market. So, waiting for rates to fall could end up costing you a lot in the short term. 

And for those looking to buy, only you can decide whether it’s the right time to move or get on the property ladder. But if you do see a property you like, remember that it may not still be available when or if mortgage rates do fall.

How to get the best mortgage deal

Whether you’re buying or remortgaging, here are some tips on getting the best mortgage deal:

  1. If you can afford to, consider putting down a larger deposit to access a lower loan-to-value (LTV) mortgage - lower LTV deals usually mean better rates, with 40% deposits generally unlocking the best deals

  2. Consider the total cost of a mortgage deal – it’s tempting to just look at the rate when comparing mortgages, but it’s important to look at the other fees involved as well as these can sometimes make a deal more expensive overall than one with a higher rate

  3. Speak to a mortgage broker who can offer expert advice and look at options from across the market to find your best deal

FAQs

It's very difficult to predict how mortgage rates might fluctuate over the course of the next six months and into 2025.

While there are some expectations that we may see a base rate fall before the end of the year, which may result in lower mortgage rates, this is not a certainty.

And with mortgage rates having fluctuated significantly since August last year despite the base rate remaining stable, a base rate reduction may not result in significantly reduced fixed rate deals becoming available initially.

With mortgage rates remaining high, you may be wondering if 2024 is a good time to remortgage or whether you should hold out for lower rates.

However, it's difficult to know when, or even if, rates will fall before the end of the year or early in 2025. And with the average standard variable rate remaining above 8%, which is higher than many of fixed and variable deals available in the market.

This means holding out for rates to fall before remortgaging could cost you quite a bit in the short term.

If you're worried about mortgage rates falling after you've secured a deal, you could consider:

  • Opting for a shorter term fixed-rate mortgage so you can switch to a new deal sooner, but be aware that rates tend to be a bit higher on shorter term mortgages in the current market

  • Looking at an ERC-free tracker mortgage that may allow you to remortgage at any point without facing fees

It's important to discuss all your options with an expert broker who can help you find the right one for you and your circumstances.

Also, remember if you've secured a new remortgage deal a few months in advance of your current one ending, you can normally switch before it officially starts. So, if rates fall before your new mortgage begins, you may be able to move to a better one without facing any penalties.

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Mortgage rates provided by Mojo Mortgages and based on deals available at the time from selected lenders

Bank of England information on the base rate

Office for National Statistics information on inflation (Consumer Prices Index)