It comes as no surprise that the new normal for mortgages comes with high rates. Last year (2023) in August, the UK saw stabilisation and de-escalation of interest rates for the first time since 2021. For many businesses and economists this was a sign of a drop in inflation and a positive sign for better financial outlook in the coming years. As we begin 2024, is the UK bracing for another hike this year or not?

UK mortgage market outlook

The mortgage market has seen a slow but steady stabilisation. The lower interest rates are positive indicators to lenders. Apart from moderate to slight fluctuations, mortgage rates have managed to remain relatively smooth. With the Bank of England keeping the base rate at 5.25% since August 2023 after a series of interest rate hikes, lenders have finally begun to feel confident about market prospects for mortgages and are seeing increased borrower activity. Estimating market trends based on economic factors such as inflation dictates how mortgages will be looked at in 2024. Dropping down from 11.1% in October 2022, inflation currently stands at 6.7% as of September 2023. And hopefully will remain the same in 2024 or drop further as the year progresses. To mortgage borrowers this could mean a lot in the way of cheaper borrowings.

As a result of the drop in inflation levels, homeowner prospects have rapidly improved for those wishing to embark on a mortgage scheme. While lower monthly repayments can present a tempting option for investing, if you are a prospective buyer you might find advice from a professional mortgage broker very useful before making your final decision.

What will mortgage rates be in the UK in 2024?

Still on a path to full recovery, the UK economic landscape won’t be easy to predict at this stage.  However, going by interest stabilisation and the Bank of England’s interest rate drop, we could be looking at a relatively undisturbed ‘flat’ playing field in 2024. Mortgage companies appeared more optimistic come the end of 2023. While interest rate drops may not happen immediately, predictions for 2024 say that interest rates will stay stable and not experience sudden hikes. As of October 2023, the average mortgage 5 year fixed rate was 6.24% and 6.34% for a 2 year fixed rate according to MoneyFacts. The latter part of 2024 could be better, with expected drops as much as 2%.

Not just a sense of optimism, borrowers can look forward to trendlines for mortgage prospects that might be slow, but are decidedly looking good for next year.

Conclusion

2023 has been a year of mixed emotions for the UK's economy.

Struggling to cope with the post Covid fallout, many countries are dealing with difficult economic challenges, and the UK was no exception. Mortgage markets and firms have been on a downward trend with little hope seen for change.

But in August 2023, the Bank of England’s stabilisation of interest rates saw a revival, which in turn has brought on a fresh start for the mortgage market in the UK. With hopes riding high, prospects for mortgages in 2024 are looking good. While the stabilised interest rates won’t see a marked decline in the near future, continuing trend lines indicate a further drop could be a possibility during the latter part of 2024. This obviously is good news for lenders as well as borrowers.

If you are among the borrowers and are waiting for a good investment to come along, 2024 might be the year to do it. You may need the advice of an experienced mortgage broker before making the decision to go ahead with a purchase.

Speak to a mortgage adviser at BVS Financial & Mortgage Services for valuable and comprehensive advice to make the most of your investment.