Mortgage Rates & House Price Forecasts 2024 (2024)

The Bank of England kept the Bank Rate at 5.25% on 1 February – the rate has been frozen since rising to its current 15-year high in August.

Financial markets and consumers are hoping interest rates may have peaked, at least for now. But what will happen to Bank Rate and, crucially for millions of borrowers, mortgage rates in 2024?

And what impact will this have on house prices?

For now, mortgage rates remain at a higher level than they have been in recent history. It means many more borrowers are set for a big payment shock when they come to remortgage in 2024.

In its recent Financial Stability Report, published on 6 December, the Bank of England said around 900,000 borrowers are set to see their monthly mortgage repayments jump by more than £500 this year, when they come off much lower fixed rate deals. Around 20% of these homeowners could see a monthly increase of more than £1,000.

That’s because they fixed their rate at around 2% two years ago, and are now staring down the barrel of around 5% when they move onto a fresh deal when the current one expires.

Mortgage rate predictions 2024

In December, Bank of England governor Andrew Bailey said he expects Bank Rate will remain at its current level of 5.25% for some time, with no cuts for the ‘foreseeable future’, as he believes inflation still has further to fall.

The annual rate of price increases edged up from 3.9% in November to 4% in December. The fact that the inflation rate has risen will only have confirmed the governor’s view, especially as the Bank’s inflation target, set by the government, is 2%.

The next Bank Rate decision is due on 21 March 2024.

The US-owned credit rating agency S&P Global Ratings has also forecast that the Bank of England will not begin cutting interest rates until the second half of next year. This means mortgage rates are not likely to fall significantly before then – although they have been creeping down in recent weeks.

The overall message on interest rates seems to be ‘higher for longer’, meaning it is highly likely mortgage rates will also stick at or around current levels for many months – especially once the December inflation reading is taken into account.

Here is a round-up of what the mortgage lending industry, economists, and mortgage and property experts have said about the outlook for mortgage rates in 2024:

UK Finance

In its latest housing and mortgage market forecasts for 2024 and 2025, UK Finance, the trade body which represents the banks, says: “The outlook is one of continuing challenges in the mortgage market. However, the main pressures on affordability look to be peaking now.

“While it will take some time for the pressure on household finances to recede, we expect things to begin to look up in 2025.

Capital Economics

Chief UK economist at Capital Economics Paul Dales, says: “We now think the recession will be shallower and growth will stay weak throughout 2024. It’s a softer landing for the economy, but the runway is longer.

“We believe the Bank of England won’t cut interest rates from 5.25% until late in 2024. But a stagnant economy will lay the groundwork for a more marked easing in price pressures in 2025 and more significant interest rate cuts. Our forecast that rates will be cut to 3% in 2025 is lower than the cuts to 4% priced into the markets.”

Nationwide

Robert Gardner, Nationwide’s chief economist, says: “There have been some encouraging signs for potential buyers recently, with mortgage rates edging down.Investors have become more optimistic that the Bank of England has already raised rates far enough to return inflation to target and will reduce rates in the years ahead. This shift in view is important, as it has brought down longer-term interest rates, which underpin fixed mortgage rate pricing.

“Nevertheless, a rapid rebound in activity or house prices in 2024 appears unlikely. While cost-of-living pressures are easing, with the rate of inflation now running below the rate of average wage growth, consumer confidence remains weak and surveyors continue to report subdued levels of new buyer enquiries.Moreover, while markets are projecting that the next Bank Rate move will be down, there are still upward risks. Inflation is declining, but measures of domestic price pressures remain far too high.”

Lloyds Banking Group

Lloyds Bank, which also owns Halifax, predicted in its interim results (third quarter of 2023), that the Bank Rate will remain at 5.25% during 2024, dropping down modestly to 5% by the fourth quarter of the year.

Rightmove

The online property portal has predicted that mortgage rates will settle in 2024 but ‘remain elevated’, tempering some buyers’ budgets, especially in the lower and middle market sectors.

Better.co.uk

Amanda Aumonier, director of sales & operations at mortgage broker Better.co.uk, says: “In 2024 we expect mortgage rates to slowly decline and the Bank of England may look to reduce the Bank Rate towards the end of the year. If that happens, expect to see fixed rates slightly fall before then to reflect market trends.

“This could bring borrowers more certainty and make it easier to budget.”

London & Country Mortgages

David Hollingworth, associate director, says: “Many experts are anticipating Bank Rate will hold firm until later in 2024 and the Bank of England has consistently stated that it will do whatever is required to bring inflation back down to its target, which is still considerably lower than where things stand today.

“Mortgage rates, on the other hand, are already on the move and fixed rates have been falling after the rapid spike in the summer. Many of the lowest five-year fixed rates are now well below 4.50% and two-year below 5%.”

House price predictions 2024

Average property prices have fallen by a relatively modest 1% to 2% over the past year, according to the leading house price indices, which each have their own methods of recording national prices on a monthly basis.

Rising mortgage rates have acted to dampen demand, with the market seeing falling prices and properties taking longer to sell.

But what could happen to house prices next year? Here’s our run down of what the property experts are predicting for 2024:

Nationwide building society

House prices to see low single digit decline or remain broadly flat in 2024.

Robert Gardner, Nationwide’s chief economist, says: “It appears likely that a combination of solid income growth, together with modestly lower house prices and mortgage rates, will gradually improve affordability over time, with housing market activity remaining fairly subdued in the interim.

“If the economy remains sluggish and mortgage rates moderate only gradually, as we expect, house prices are likely to record another small decline or remain broadly flat – perhaps 0 to minus 2% – over the course of 2024.”

Halifax

Prices predicted to fall by between 2% and 4% in 2024

Kim Kinnaird, director, Halifax Mortgages, says: “With the combination of cost of living pressures and interest rates much higher than two years ago, we will likely see continued mild downward pressure on house prices. A partial recovery in market confidence and transaction volumes is expected.”

Zoopla

House price growth will remain negative with prices down 2% next year

Zoopla says that to see a meaningful reset when it comes to affordability, house prices will need to fall further as incomes increase. Assuming mortgage rates drop to 4.5% by the end of 2024, Zoopla expects that house price growth will remain negative with prices down 2% over 2024.

Rightmove

New seller asking prices to drop by 1% in 2024

Tim Bannister, Rightmove’s director of property science, says: “With improved market stability as we head into 2024, there are signs of greater activity from family movers. With the mortgage market more settled and the expectation that the Bank of England Bank Rate has peaked, those looking to move up the ladder and take out a larger mortgage, may now feel in a stronger position to act.”

Is 2024 a good time to remortgage?

Whether or not 2024 will be a good time to remortgage will depend on a range of factors, including the financial circ*mstances of the individual borrower.

Figures from the regulator the Financial Conduct Authority show that around 1.5 million homeowners will come to the end of fixed-rate mortgage deals during 2024. And the Bank of England has estimated around five million homeowners will see their monthly mortgage payments rise between now and 2026.

Most borrowers will see a significant spike in their monthly mortgage costs as rates have climbed significantly over the past two years.

But the positive signs are that, with the Bank of England holding interest rates in December, the mortgage market could now start to stabilise. It means borrowers who need to remortgage in the first few weeks and months of this year should find better deals and rates available compared to six months ago, when inflation and the Bank Rate were both still rising and the outlook was uncertain.

Borrowers could benefit from any mortgage price wars that might emerge early in 2024 as lenders vie for business. This was seen in the later months of 2023 when lenders started offering fixed rates at under 5% and then closer to 4.5% as a way of attracting new customers. Some rates on five-year deals are now comfortably below 4%.

Nick Mendes at broker John Charcol says: “Lenders will be motivated to attract new business in 2024, given the level of transactions and applications were down in 2023 compared to previous years. As such, lenders will be looking to remortgage rates aggressively to build their mortgage book. We could also see more lenders release sub-4.5% five-year fixed rates, with two- and three-year fixed rates at around 4.8%”.

Although there is likely to be significant rate shock for borrowers coming off super low fixed rates in 2024, remortgaging to a new deal will usually be cheaper than being automatically moved on to a lender’s standard variable rate (SVR). The average SVR is at 8.19%, according to Moneyfacts.

What do current mortgage rates mean for remortgaging in 2024?

Rising mortgage rates during 2023 appear to have led more borrowers to refinance with their existing lender, rather than remortgage to a deal with a different bank or building society.

Most lenders offer product transfer or switcher rates to their existing customers when they come to the end of a mortgage deal. Often these might be at preferential rates or with low or no fees, as an incentive.

Plus, crucially, at a time of rising mortgage costs and general cost of living pressures, the borrower does not need an affordability assessment for a product transfer. In contrast, affordability must be rigorously checked under mortgage regulations when moving to a deal with a new lender.

UK Finance data shows around 1.5 million borrowers came to the end of fixed rate deals during 2023. It says in the year to date there have been 1.3 million pound-for-pound refinances of these mortgages (so borrowers took a new mortgage deal but did not borrow any more) and of these nearly nine in ten of were internal product transfers with an existing lender.

Product transfers increased by 11% to £219 billion in 2023, according to the trade body, whilst external remortgaging fell by 21% to £65 billion.

It suggests more borrowers have found it easier and more cost effective to take a product transfer deal.

While this trend is widely expected to continue in 2024 (around 1.5 million borrowers are due to come to the end of fixed rate deals this year), some experts are predicting there could be a gentle swing back to remortgaging, as keener rates start to lure borrowers.

UK Finance has predicted a marginal fall in both external remortgage activity and product transfers (a fall of around 8% for both categories) in its housing and mortgage market forecasts for 2024, due to there having been a peak in maturing two-year fixed rate deals in 2023.

Riz Malik, founder of broker R3 Mortgages, says: “I’m optimistic for those seeking to remortgage. Recent months, particularly the last few weeks, have demonstrated lenders’ willingness to implement substantial rate reductions.

“More lenders are likely to prioritise market share over profit margins, especially during the first quarter of 2024 and borrowers should benefit from that with lower rates on offer. This trend could shift the focus towards remortgaging, as opposed to product transfers, which were prevalent in 2023.”

How to get a lower mortgage rate

The good news is that despite higher mortgage rates there are things you can do to secure a competitive home loan deal.

Action you can take includes:

• using a mortgage broker: Using a fee-free mortgage broker (such as our partner Better.co.uk) who can scour the market to find the most suitable deals for your needs
• starting looking early: If your current mortgage deal is coming to an end in 2024 you can speak to a broker and start looking for a new deal up to six months ahead of the end of your existing deal. You could lock in a competitive fixed rate now, for example, but if rates did fall during that time you could still switch to the best rates at the time
• boosting your credit score: Take steps to strengthen your credit score
• saving: By accumulating a larger deposit towards a home purchase you may be able to get a lower mortgage rate
• considering different mortgage terms: A five-year fixed rate could have a lower interest rate than a two-year deal, for example. But look out for the arrangement fees as these can bump up the total cost of a deal
• speaking to your current lender. It is worth comparing product transfer deals (the rate and fees) with the prevailing deals in the open market to see if you might save money by sticking with your existing lender.

What affects mortgage rates?

A complex set of factors impact mortgage rates, including broader economic conditions, the monetary actions of the Bank of England and inflation. Fixed mortgage rates are also directly impacted by swap rates. These are the interbank interest rates at which the banks lend to each other in the wholesale markets.

The rate you’re offered on a mortgage will also depend on the lender you opt to borrow from and your credit score and financial position.

Demand for mortgages can also affect rates, pushing them higher as available capital for lending tightens. Conversely, when there’s less borrower demand, as we have seen in recent months due to high fixed rates, lenders will sometimes offer more competitive rates or other incentives to attract borrowers and increase business.

How to find the best mortgage rate

Getting a great mortgage rate can save you a significant amount of money over time. Here are some tips that can help you get the best rate possible for your situation:

• keep your eye on rates and act early. Mortgage rates are constantly changing. Keeping a close watch will make it easier to find and lock in a better rate ahead of time. As mentioned above typically lenders will allow you to lock in a new mortgage deal up to six months before your existing rate comes to an end

• check your credit score. When you apply for a mortgage, the lender will review your credit to determine your creditworthiness. In general, the higher your credit score the better your rate will be

• compare lenders. Consider options from as many lenders as possible and use a mortgage broker to find the best deal for you.

Mortgage rate predictions for the next five years

Predicting mortgage rates for the next five years is a tall order, especially considering the uncertainty seen over the past two years with record high inflation, stagnant growth in the economy and huge cost of living pressures for households

As far as which direction interest rates will go in the years ahead, most experts concur there will be a gradual fall. However, the timeline for this downward trend remains uncertain.

John Charcol’s Mendes says: “While no one can confidently preempt market conditions in a year, two years or even five-years’ time, markets are forecasting future Bank Rate reductions. It means mortgage holders are likely to become more accustomed to seeing fixed rates starting at sub-4% in the long term, which would be welcome.”