What's happening with mortgage rates?

At the start of 2024, there was news of mortgage rates falling, but they've started to rise again in recent months. While not as high as they were last summer, the average fixed mortgage rate now stands at 5.2%* compared to 4.7%* in February, according to our broker partner Mojo Mortgages. This is despite the base rate remaining the same since August.

Why are mortgage rates changing so much, despite the base rate remaining stable? In this article, we explain what the base rate is and its impact on mortgages. We also look at average mortgage rates over the past six months and whether they are set to fall or rise further in 2024. 

What’s the current base rate for the Bank of England?

The current Bank of England base rate is 5.25%.

The last base rate announcement was on 9th May 2024. This rate has stayed the same since August 2023.

The Bank of England's Monetary Policy Committee (MPC) meets 8 times a year, or roughly every 6 weeks. The next MPC meeting is scheduled to be on the 20th June 2024.

Before August, the base rate was increased 14 times in a row. This was in an effort to fight rising inflation, by encouraging people to save rather than spend or borrow. As a result, mortgage rates have risen substantially since the end of 2021. 

How does the base rate affect your mortgage?

The base rate’s overall impact on your mortgage depends on the type of mortgage you have.

Fixed-rate mortgage:

With a fixed-rate mortgage, your interest rate remains the same throughout the specified introductory deal period.

But fluctuations in the base rate can influence the rates offered for any new fixed-rate mortgage deals. So if you’re remortgaging, the rates available may be different to when you initially secured your current mortgage deal.

Tracker mortgage:

If you have a tracker mortgage, your interest rate is normally linked to the base rate.  This means any changes in the base rate directly impacts your mortgage rate and your monthly repayments.

For example, if the base rate increases by 0.5%, your mortgage rate also increases. If the base rate falls, so does your mortgage rate

Discount and standard variable rate mortgages:

If you have a discount mortgage, your interest rate is set at a certain level below your lender’s standard variable rate (SVR). The SVR is the one you’re moved on to after your initial mortgage deal ends, and is usually higher than other rates on the market.

The standard variable rate is set by your lender, but can be influenced by base rate changes. If you have a discount mortgage or are currently on the SVR and the lender chooses to increase or decrease it, you’ll face a corresponding change in your mortgage payments.

If you’re unsure about getting a mortgage, the expert advisers at Mojo Mortgages are happy to help at no charge.

Bank of England base rate and mortgage rates over the past year

Here are all the base rate announcements from the past year, alongside what the average fixed mortgage rate was at the time.

Over the last six months, the average fixed rate has actually dropped below the base rate due to several mortgage lenders reducing rates on their fixed-rate deals. 

This may be due to some signs that inflation was falling, which led to some expectations that the base rate may fall sooner than expected. Lender competition also likely caused rate reductions, as banks and building societies repriced their deals to attract more customers. 

Rates have increased slightly in the past couple of months after the most recent base rate announcement. This is despite the inflation rate being at its lowest level in over two years. The mortgage rate rises have largely been due to swap rate increases, which some suspect are due to inflation not falling as much as was hoped. 

What happens if my mortgage is affected by the base rate change?

If you’re on a tracker mortgage deal, your lender should contact you. They’ll inform you of the new monthly payment amount and the date that this will take effect.

For those on discount mortgages or the SVR, your lender should also notify you if your rate has changed and what your new payment amount is.

If you have any concerns following a base rate announcement, you can reach out to your lender.

Will mortgage rates go down in 2024?

Mortgage rates fell towards the end of 2023 and start of 2024, but we’ve recently seen some increases again. This volatility means that it’s hard to say for certain whether rates will go down in 2024 as it’s very difficult to predict what’ll happen next in the market.

We can say that the base rate has remained static at 5.25% since August 2023. And Andrew Bailey, Governor of the Bank of England, has indicated that they don't need to wait for inflation to come back down to the target of 2% for them to start cutting rates.

But Andrew Bailey also indicated that they're waiting for clear signs that inflation is easing when deciding whether interest rates can be cut. He said they would look at the following following factors to help them assess this:  

• Services prices
• Pay rises
• Quantities in the labour market

Some economists are still predicting a base rate reduction this year, with most pointing to September as the earliest date we could see it fall (although some say it could be reduced earlier than this). But it's impossible to say for sure. And given the volatility we've seen in recent months despite the base rate remaining the same, it's also tricky to know exactly what would happen to fixed mortgage rates if the base rate was to fall. 

What our mortgage expert says:

"After months of holding the base rate at 5.25%, the Bank of England has confirmed their decision to reduce it. Those on tracker mortgage deals will likely be pleased as this should mean they benefit from lower repayments almost immediately.

"Some may also hope this results in cheaper fixed-rate deals becoming available. However, fixed mortgage rates have generally remained quite volatile despite the base rate remaining the same since last August, which makes it difficult to predict what will happen to these deals.

"For those who need a new mortgage in the near future, whether for a new property or an existing one, consider speaking to an expert who can explain all your options in this fast-changing market."

Claire Flynn Mortgage expert

How to get the best mortgage deal

The best mortgage deal depends on your personal circumstances. But there are things you can do which may help improve your chances of getting a cheaper mortgage deal:

• Put down a larger deposit if you can afford to, as a larger deposit means a bigger loan to value (LTV) ratio, which usually means better rates
• Check that you have as little debt as possible and reduce overall spend on non-essential outgoings
• Make sure all credit card and other payments are made on time
• Check that you’re on the electoral register and review your credit report for any mistakes
• Use a whole-of-market mortgage broker, who can look at deals from lots of different lenders to find the best one for you

Ultimately, there are lots of different factors that affect what rates and deals you have access to. If you’re ready to secure your next mortgage deal, speak to our whole-of-market experts at Mojo Mortgages.

*All mortgage rates are based on Mojo Mortgages data of fixed-rate mortgages available at the time from 5 of the biggest lenders (HSBC, Santander, Nationwide, Natwest and Halifax).

All mortgage rates are correct as of 10 May 2024 - rates are subject to change at any time.