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Where will mortgage rates go next?

Journalist: Myra Butterworth, Freelance

ended 22. August 2024

Hi, I'm writing a story for Mortgage Solutions. I’m looking for some predictions and comments about how far mortgage rates will drop?

  • How far will mortgage rates drop by the year end? And on what types of product?
  • What are the biggest factors in the wider economic environment that are affecting your prediction?
  • Do borrowers have realistic expectations about the new higher rate mortgage environment - or is there a lost generation of borrowers who still expect access to cheap rates?

7 responses from the Newspage community

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Gabriel McKeown
Head of Macroeconomics at Sad Rabbit - Substack Newsletter
The Bank of England's recent decision to reduce the base rate from 5.25% to 5%, combined with an anticipated further rate reduction at the tail-end of the year, has sparked optimism among homeowners and prospective buyers. With inflation expected to continue its downward trajectory, this improving economic backdrop would be a welcome relief from the challenging environment for borrowers who were accustomed to historically low rates. This trend has led to sub-4% mortgage rates becoming more prevalent for fixed-rate products. However, despite this positive economic outlook, borrowers should remain cautious and informed about the broader factors at play in this ever-evolving landscape.
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Mark Eaton
COO at April Mortgages
In our experience, borrowers are waking up to the fact that rates, while they matter, are not the be all and end all of taking out a mortgage. Peace of mind and stability of payment are equally important for a growing number of borrowers. After the ups and downs of the past two years, people are increasingly conscious that mortgage rates can be very volatile and are asking themselves whether they want to be exposed to that volatility every two years. We’ve noticed an increase in demand over the summer as buyers seek to lock into longer term rates to protect themselves against economic uncertainty and get on with their lives knowing that, whatever is happening in the markets, they have peace of mind.
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Darryl Dhoffer
Founder at The Mortgage Geezer
It's a flux capacitor situation. Mortgage rates, they're like time travel – unpredictable. Depends on inflation, economy and world events. Fixed rates might get a bigger discount, but who knows? Bottom line, be prepared for the future. Don't get stuck in the past with high rates, and dont expect the future to command low rates.
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Dariusz Karpowicz
Director at Albion Financial Advice
We're seeing some real momentum with lenders cutting rates, particularly for products with lower LTVs. I expect we'll soon see more significant changes in the higher LTV, lower deposit space too. While many borrowers are starting to accept that the era of rock-bottom rates is over, there's still a group hoping those super-cheap rates will return. And then there's the minority, like me, who think it'll be a very long time before we see mortgage rates starting with a 1 or 2 again.
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Michelle Lawson
Director at Lawson Financial
Rates are still falling with some of my customers on their sixth or even seventh product change since application. As to where rates will go, it's like looking into a crystal ball. Unless anyone has been hiding or in denial, most people are aware that the rates aren't as low as they were or will be any time soon, if ever again. All people can do is what is right for them for the here and now and keep on top of market movements. Engaging a good broker has never been so important.
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Ben Perks
Managing Director at Orchard Financial Advisers
Since Truss blew up the mortgage market, the most frustrating thing has been the lack of disparity between loan-to-value levels. The difference in rate available for a 5% deposit and a 50% deposit is negligible. This will be the first thing to improve over the coming months, and we have already had a glimpse of it with Nationwide’s 3.78% offering announced this week at 60% LTV. I don’t think we will see huge reductions across the board, but the rate margins should broaden over the final quarter of 2024.
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Elliott Culley
Director at Switch Mortgage Finance
The outlook for the rest of the year is looking positive. There is confidence the base rate may fall further, which should install further confidence in the mortgage market and drive rates lower. However we have been in this position before with rates falling into the 3%s, only to be brought back to the new reality we face. The economy is still fragile and we are not out of the woods completely yet. The new normal is likely to be rates in and around the 3% mark. The days of 1%-2% are very much in the rear view mirror.