As we look to the new year, there is good news on the horizon, as experts widely agree that mortgage rates will come down in the next few months. Anyone with a mortgage – or hoping to take out a mortgage – in 2024 will be relieved to see signs of the market regaining some stability. When the Bank of England announced no change to the interest rate in December, lenders began to lower their rates and this trend looks set to continue.
Well, as Aaron Strutt of Trinity Financial explains, five year fixes are dropping to below 4%. He says: "Banks and building societies typically use 'swap rates' to fund their mortgages and they have been falling in recent months. This should mean the lenders will be able to issue cheaper rates. Bank of England governor Andrew Bailey has been keen to stress that the base rate will remain high to curb inflation. Thankfully, the money markets are predicting base rate reductions and cheaper mortgages."
It is widely agreed that higher mortgage rates have had a negative effect on the property and finance markets, but rates are now significantly better than they were in the first half of 2023. "Many people have held off from buying or moving home until rates are affordable again and they are significantly cheaper than they were.
Which lenders are offering the lowest rates?
"Many of the largest lenders offer the cheapest rates including Nationwide for Intermediaries, NatWest and Santander. Barclays and Halifax also have some of the most completely priced large mortgage loan rates. Halifax has a two-year fixed rate of around 4.6% and a five-year rate of just below 4.3%. These mortgages are available to borrowers with a 40% deposit and have £999 arrangement fees.
What will happen to the market?
Strutt says: “As we head into 2024 it is anticipated that transactions among first-time buyers will start to increase as market conditions stabilise and confidence returns to the housing market. According to research by Coventry Building Society, 330,000 first-time buyer transactions are expected in 2024. The total value of mortgage lending to first-time buyers is set to amount to £65.3 billion in 2024 and increase to £71 billion in 2025."
However, for the 1.5 million homeowners who are set to come off fixed rate mortgages in 2024, its not all good news. Even the new lower rates are higher than anything seen before 2022, so an increase in monthly repayment costs is unavoidable. The Bank of England estimates that five million homeowners will see their monthly payments rise between now and 2026, so while we may be over the worst, interest rates are very unlikely to return to the lows that fuelled such strong market activity in the past few years. Still, 2024 is likely to prove a happy new year overall for homeowners.