It’s been a whirlwind year for existing and potential homeowners after mortgage rates soared in the wake of the mini-budget at the end of September 2022.
On the day of the mini-budget, the average two-year rate was 4.74%, but by the following Friday, the average deal was 5.17%, according to Moneyfacts.
There have been several base rate hikes in 2023 in a bid to tackle stubbornly high inflation, which led to the average mortgage rate exceeding 6.5% during the summer.
However, mortgage rates have recently been on a downward trajectory, so what’s changed? And will this continue into 2024?
We’ll delve into what you need to know.
Why have mortgage rates recently fallen?
Mortgage rates have been falling thanks to positive inflation data and the belief that interest rates have peaked after the Bank of England (BoE) held the base rate for the third time in December.
With some experts speculating that interest rates could be cut from March 2024, this is good news for homeowners.
Swap rates have also been declining, which is based on where the market thinks interest rates will be in the future. This is significant as swap rates are used to price fixed-rate mortgage deals.
Finally, as the housing market is now struggling due to high mortgage rates, lenders are incentivised to reduce their rates.
The average two-year fixed mortgage rate for someone with a 40% deposit is around 4.8%, with some experts speculating rates could drop to around 4% by the end of 2023.
Mortgage rate predictions 2024: will they go down?
This is tricky to predict as mortgage rates are impacted by many factors such as inflation, interest rates, swap rates and so on.
While many experts predict that the base rate will be cut next year, this depends largely on whether UK inflation continues to fall as expected.
In November, UK inflation fell more than expected to 3.9%, which is the lowest inflation has been in over two years.
Inflation is anticipated to keep falling in 2024 and may reach the BoE’s 2% target earlier than expected.
As inflation has declined faster than expected this year, the BoE could start cutting the base rate in 2024 and possibly fall to 4% by the end of next year, according to data from private bank Berenberg.
All these factors are good news for homeowners as mortgage rates are likely to keep falling, especially as the base rate directly affects variable-rate mortgage holders.
If you have a variable-rate mortgage, it might be worth considering a fixed-rate deal. Unbiased can connect you to a qualified mortgage broker so you can find the best deal for you.
On a final note, any forecasts should be treated as such, as many factors can change the direction of mortgage rates – and these will still be high compared to historic lows.
If you're looking to get onto the property ladder, you can check how much you could afford to borrow using our free mortgage calculator.
We’ll find a professional perfectly matched to your needs. Getting started is easy, fast and free.
FAQs
NAR: Rates Will Decline to 6.5% The National Association of Realtors expects mortgage rates will average 6.8% in the first quarter of 2024, rising to 7.1% in the second quarter, according to its latest Quarterly U.S. Economic Forecast.
How much are mortgage rates expected to drop in 2024? ›
Mortgage rate predictions 2024
The MBA's forecast suggests that 30-year mortgage rates will fall into the 6.4% to 6.7% range throughout the rest of 2024, and Fannie Mae is forecasting the same. NAR believes rates will average 7.1% this quarter and fall to 6.5% by the end of 2024.
Will Fed rates go down in 2024? ›
After the last meeting meeting, the Fed predicted three quarter-point cuts by the end of this year. As time goes on, however, that becomes less of a certainty. Some economists have even suggested rates won't budge until March 2025.
How low will mortgage rates drop in 2025? ›
Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
What are interest rate predictions for the next 5 years? ›
Trading Economics offers a more optimistic outlook, predicting a rise to 5% in 2023 before falling to 4.25% in 2024 and 3.25% in 2025. This forecast is supported by Morningstar's analysis, which projects rates between 3.75% and 4%.
Will mortgage rates ever be 3% again? ›
After all, higher rates equate to higher minimum payments. So, you may be wondering if, and when, mortgage rates might fall to 3% or lower again - and whether or not it's worth waiting to buy a home until they do. Although rates could fall to 3% again one day, it's not likely to happen any time soon.
Should I lock my mortgage rate today? ›
Once you find a rate that is an ideal fit for your budget, lock in the rate as soon as possible. There is no way to predict with certainty whether a rate will go up or down in the weeks or even months it sometimes takes to close your loan.
What is the Fed interest rate forecast for 2025? ›
The median estimate for the fed-funds rate target range at the end of 2025 moved to 3.75% to 4%, from 3.5% to 3.75% in December. For the end of 2026, the median dot now shows a target range of 3% to 3.25%, versus 2.75% to 3% three months ago.
What is causing inflation in 2024? ›
In 2024, several factors may contribute to inflationary pressures, including pent-up consumer demand, rising commodity prices, and ongoing supply chain disruptions.
Will interest rates go down in 2024 for cars? ›
Lower Auto Loan Rates Could Make 2024 a Good Time To Buy or Refinance. While market predictions are bullish on the funds rate — and by extension, auto loan rates — finally coming back down in 2024, it's still not a guarantee. Powell and others at the Fed remain committed to their target of 2% inflation.
The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025. Here's where mortgage interest rates are headed for the rest of the year and how that will impact the housing market as a whole.
What is the mortgage rate forecast for 2026? ›
The 10-year treasury constant maturity rate in the U.S. is forecast to decline by 0.8 percent by 2026, while the 30-year fixed mortgage rate is expected to fall by 1.6 percent. From seven percent in the third quarter of 2023, the average 30-year mortgage rate is projected to reach 5.4 percent in 2026.
What is the market prediction for 2025? ›
Meanwhile, the median streak of positive returns can extend to 17 months with a gain of 14%, based on historical data. That suggests the S&P 500 could trade to 6,000 by August 2025, and to as high as 6,150 by November 2025.
Will mortgage interest rates go down in 2024? ›
The general consensus among industry professionals is that mortgage rates will slowly decline in the last quarter of 2024. The projected declines have shrunk, though, in recent months. At the start of the year, for instance, Fannie Mae predicted rates would drop to 5.8%.
Will 2024 be a good time to buy a house? ›
In summary, buying a house in California in 2024 may be a good time for some buyers, depending on their personal and financial situation. The housing market is expected to rebound from a sluggish year in 2023, with more supply and demand, higher prices and affordability, and lower mortgage rates and inflation.
What is a good mortgage rate? ›
As of May 29, 2024, the average 30-year fixed mortgage rate is 7.01%, 20-year fixed mortgage rate is 6.77%, 15-year fixed mortgage rate is 6.18%, and 10-year fixed mortgage rate is 6.06%. Average rates for other loan types include 6.96% for an FHA 30-year fixed mortgage and 7.17% for a jumbo 30-year fixed mortgage.
Will CD rates go down in 2024? ›
"CD rates will most likely drop and drop substantially in 2024," says Robert Johnson, professor of finance at Heider College of Business at Creighton University. "The biggest reason is the likelihood of Federal Reserve rate cuts later this year."
Will HELOC rates go down in 2024? ›
HELOCs benefit most from rate decreases. With the Fed looking to lower rates later in 2024, a HELOC may be more beneficial than a home equity loan because the rate could go down.
