Will mortgage rates go down in 2024?

Last updated by Claire Flynn on 7 August 2024

In this article:

• When will mortgage rates go down?

• Why are mortgage rates so high?

• Will the base rate fall in 2024?

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

• How to get the best mortgage deal

When will mortgage rates go down? 

On 1 August 2024, the Bank of England base rate fell to 5% from 5.25%. Naturally, many are wondering what the impact on mortgage rates could be.

Those on tracker deals linked to the base rate should see their mortgage rate come down almost immediately. But the impact on fixed-rate mortgages is a little trickier to predict.

That's because they tend to be priced based on swap rates, although these are influenced by the base rate. Two-year swap rates fell from 4.2% to 4.0% on 5 August.

Some lenders had already reduced fixed rates in the run up to the Bank of England announcement, while other banks and building societies have announced falls after.

Despite both swaps and mortgage rates falling, it’s still difficult to know what will happen to mortgage rates in the second half of 2024 and whether they could continue to fall.

There has been a lot of rate volatility during 2024, and particularly in the last few months. In June, in the lead up to the General Election, lenders initially increasing rates but several have now reduced them on selected products, including Barclays, HSBC, Natwest and Halifax. 

With Labour at the helm, many wondered what the impact of the election result on mortgage rates will be. Some might think this has been answered with the most recent base rate change, 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). 

You can see from the data above, that fixed mortgage rates were very volatile over the past year, despite the base rate remaining at 5.25% between August 2023 and July 2024.

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.

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. Although it has recently fallen to 5%.

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 again in 2024? 

Now that inflation is down at 2% and the base rate has fallen to 5% after only having being increased or held for the past 4 years, people are likely waiting for rates to fall further.

But base rate forecasts have changed frequently in recent months as economic conditions have changed, making it difficult to say for sure whether the August reduction is a sign of things to come. 

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 certain. Despite the base rate remaining the same from August 2023 to July 2024, fixed-mortgage rates changed a lot in that time. 

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