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Are mortgage rates likely to go up or down in 2024?

Joe Minihane
Written by  Joe Minihane
Kim Staples
Reviewed by  Kim Staples
5 min read
Updated: 21 Mar 2024

Whether mortgage rates will go up or down in 2024 depends on a few things. While the UK economy remains on an unstable footing, there are signs that the wider picture is beginning to settle. Read on and we’ll explain how this may affect mortgage interest rates and what that means for you in 2024.

What factors affect interest rates?

Interest rates rise and fall depending on a number of different factors. Eight times a year, the Bank of England’s Monetary Policy Committee (MPC) meets to discuss whether interest rates should rise, fall or stay the same.

These rates then feed into the mortgage market, with lenders varying the rates they offer based on the MPC’s decision.

At the moment, the key factor driving interest rate changes is inflation. Inflation has run higher than the government-set target of 2% for many years, rising as high as 11% in October 2021, and standing at 3.4% in February 2024.

By raising interest rates when inflation is high, the Bank of England's MPC aims to lower demand in the economy, making borrowing (including mortgages) and buying products more expensive in the process. In doing so, inflation should, in theory, come down.

Once inflation comes down and the economy shows signs of growth, then interest rates should stabilise and eventually come down. With steady growth, the MPC will feel more comfortable with a lower rate, as businesses will be willing to invest in infrastructure and housing, creating more jobs and a healthier tax base for the government.

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How much do you owe on your mortgage?

This is the amount outstanding on your most recent statement - check your paper or online banking to find it, or give your lender a call if you can't.

NB it isn't the same amount you borrowed initially, as each payment you make reduces what you owe.

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How long until it is fully repaid?

This is how long until you are completely mortgage free. So if you originally took out a 25 year mortgage five years ago, then enter 20 into here.

This should be on your statement, application info or can be obtained from your lender.

What type of mortgage do you have?

A repayment mortgage means that, over the length of the loan, you will repay the full amount you borrowed as well as some interest.

An interest-only mortgage means you only pay the interest, and once the loan is over (eg, 25 years after you took it out), you still owe the amount you borrowed.

If you don't know which type you have, call your lender to ask.

Enter your current annual interest rate

This should be on your annual statement or the agreement you received when you took out the mortgage. If you can't find it, give your lender a call.

If you are currently on a short-term promotional rate - a fixed-rate deal for example - enter that rate here.

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Now for overpayments... do you want to make a one-off and/or a regular payment?

Many mortgage lenders let you make some overpayments without charging you a fee for doing so. There is usually a limit to this though, and if you overpay by more you may be charged.

The limit is usually either a percentage of your normal monthly payment (eg, you can only pay 20% more per month) or a percentage of your outstanding balance (eg, each year you can overpay by up to 10% of the amount you owe in total). Call your lender to check how much you are allowed to overpay by.

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Oops! Are you sure? This doesn't look right.

Oops! The overpayments you have chosen will not have an impact on your mortgage repayments.

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How have interest rates changed?

As of March 2024, the base rate remains at 5.25%. This is the highest it's been since the 2008 financial crash and is the fifth 'no change' decision in a row.

Although the base rate has been maintained, as recently as 2021 the base rate was just 0.1%.

This means that over the last few years those on fixed term mortgages coming to the end of their deal have had to move to mortgage deals that are much more expensive than their previous plan.

Meanwhile, those on variable rate mortgages saw their monthly payments rise throughout 2022 and 2023 and look likely to be paying more for some time yet.

Why would interest rates go up?

Interest rates can go up for a number of reasons. Inflation is the primary driver, and this can be pushed higher thanks to external factors beyond government control.

In recent years, inflation has increased due to the war in Ukraine driving up the price of oil and crops. This has in turn made shipping such goods more expensive, with prices being passed on from businesses to consumers. It has seen everything from groceries to petrol soar in price.

Such high inflation can be tempered by higher interest rates, which makes goods more expensive, dampening demand and forcing suppliers to cut prices, so that goods then become cheaper.

How do higher interest rates affect the housing market?

Mortgages and mortgage rates usually go up when the Bank of England base rate rises. Often, the rates lenders charge are higher in order to cover their costs.

When mortgages become more expensive, it means that the housing market theoretically slows down. That’s because monthly repayments for mortgages are more expensive, especially compared to a few years ago, when some two year fixed mortgages were offered on deals below 1%. That makes it harder for first time buyers to find an affordable deal, even more so because inflation has pushed house prices up and made the need for even bigger deposits greater.

Remortgaging also becomes more expensive, as does moving home, as homeowners have to find extra money for monthly mortgage payments.

The end result is a slower housing market with prices, in theory, coming down. The ideal situation is that this then makes it more affordable for people to move, with interest rates falling in turn.

The balance for policy makers is to ease house prices without making it so expensive to borrow that it provokes a crash in the housing market, which could be devastating for millions of homeowners and potential buyers.

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