For first-time buyers and property investors alike, knowing when mortgage rates will drop can be key to making smart decisions. Interest rates affect the borrowing power of millions of people across the UK, and with the ongoing cost of living crisis, finding a good mortgage deal is more important than ever. The good news? There is relief in sight. This article looks at what’s changing with mortgage interest rates in 2024 and what to consider for your buying or investing plans.

    2024 Mortgage Rates

    2024 is a mixed bag for the UK housing market. At the start of the year, mortgage rates were high, a carry-over from 2023. July 2023 was the peak, driven by inflation and the Bank of England’s base rate. First-time buyers and property investors saw monthly mortgage payments rise as the average 5-year fixed 80% loan-to-value (LTV) mortgage rate hit 6.12%. That was tough for many, with average monthly payments at £1,096.

    Fast-forward to now and there’s a glimmer of hope as the Bank of England has dropped interest rates to 4.76% and monthly repayments average £949. That’s a £150 a month savings, which is a big deal for many. In London, the reduced borrowing costs are even more pronounced, with mortgage repayments down by over £300 compared to last year.

    House prices are also rising slower than expected; 2.2% by July 2024 compared to the expected 2.7% It’s important to stay up to date, as these changes aren’t UK-wide. Talk to a mortgage broker to get clarity on localised rates and average payments for your desired purchase location.

    What Makes Interest Rates Fall?

    Several things are contributing to the drop in average mortgage rates, and it’s good news for buyers:

    Government and Economic Growth

    The political landscape has a big impact on economic stability and confidence. The new Labour government has brought more stability. Political stability affects market expectations and means economic confidence, which is good for lending and UK interest rates. A more predictable government can influence inflation, which means lenders can be more confident and offer better mortgage rates.

    Inflation

    Inflation is another key driver of mortgage rates. Over the past year, the UK has seen a big drop in inflation. Between May 2023 and August 2024, inflation fell from 6.5% to 4.3%. That’s led to expectations of further base rate cuts, and mortgage lenders are offering more competitive deals. The Bank of England decision to cut rates from 5.25% in August set the tone for this. Nationwide and First Direct have already responded by launching lower rates, in line with the overall economic mood.

    Should I buy now or wait?

    The decision to buy now or wait for lower rates in 2024 is complex. Each option has its pros:

    Reasons to buy now

    • Immediate savings: Lock in the current lower rates with a fixed-rate mortgage and reduce your monthly outgoings. A good fixed-rate deal can save you money if the price rises during the life of your loan.
    • Market stability: Get into the market now and lock in a fixed deal on rates before any potential volatility or interest rate rises.
    • Equity building: The sooner you buy, the sooner you start building equity, which is good for you in the long run.

    Reasons to wait

    • Further rate cuts: Waiting could mean even lower payments and lower overall mortgage costs over the term if rates keep falling.
    • Market volatility: While rates are good now, the market is unpredictable and property prices and mortgage availability could change.

    The type of mortgage you choose will also affect whether you buy now. Good fixed-rate mortgage deals lock in the current rate, while variable mortgage rates offer flexibility if the UK interest rates fall further, but pose a risk if the interest rates rise.

    For existing mortgage holders, the falling interest rates may mean it’s a good time to remortgage for better fixed rates. Your existing lender may offer better rates, but it is a good idea to shop around for fixed-term deals. Use tools like a mortgage calculator and talk to a broker to see if you’re getting the best mortgage deal.

    What affects your mortgage rate

    Understanding what affects your mortgage rate is key to making informed decisions. Some factors that affect your interest rate include:

    • Credit Score: Your creditworthiness is a big factor in the rate you’ll be offered and your ability to borrow money. A higher credit score means a lower rate.
    • Loan to Value (LTV): The size of your deposit compared to the property value affects your mortgage rate. A bigger deposit means a lower rate.
    • Economic conditions: Broader economic indicators like inflation, financial markets, wage growth and employment rates impact the overall mortgage market.

    Stay informed about these and talk to financial advisors or mortgage brokers regularly to make the best decision for you.

    How a mortgage broker can help

    Mortgage rates and the housing market can be complicated. A mortgage broker like Eden Hawk, Cardiff can add huge value:

    • Expert advice: Brokers have in-depth knowledge and experience to help you understand the different mortgage products. They keep track of changes made by the Bank of England and other major central banks and understand what these changes mean for borrowers.
    • Personalised solutions: A broker will assess your situation and recommend mortgage options that fit your savings rates and your goals. This includes helping you find good fixed-rate deals or variable-rate mortgages for your needs.
    • Market access: Brokers often have access to exclusive deals and competitive rates that aren’t publicly available, so you get the best terms.

    Eden Hawk Financial Solutions’ advice and connections will be valuable when borrowing money for your next mortgage.

    Conclusion

    UK mortgage rates are key to your home buying and investment strategy. For first-timers and seasoned property investors, understanding what affects them is important. While rates are falling now, the decision to buy now or wait should be thought through, weighing the immediate savings against possible future cuts.

    Talk to experts and stay informed, and you’ll be in the best position to take advantage of these changes. Whether you’re ready to buy or prefer to wait and see if the market changes, Eden Hawk Financial Solutions is ready to help you reach your mortgage goals in today’s market.

     

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