What will happen to UK mortgage interest rates in 2024? | WIS Mortgages
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18th June 2023

What will happen to UK mortgage interest rates in 2024?

As we journey further into 2023, the future of the UK mortgage market remains at the forefront of many minds. In a landscape shaped by the global COVID-19 pandemic, Brexit, and various other economic factors, predictions regarding mortgage interest rates in 2024 are more challenging yet crucial than ever before. This article provides an informed forecast of what we could expect from UK mortgage interest rates in 2024.

A Look Back at Historical Interest Rate Trends

To anticipate the future, it really helps to understand the past. Historically, the Bank of England's Monetary Policy Committee (MPC) has overseen interest rate decisions based on economic stability. In the past decade, due to the financial crisis and the global pandemic, the UK has experienced historically low-interest rates.

This has been beneficial to borrowers, particularly those with tracker mortgages that rise and fall in line with the Bank of England's base rate. However, economic improvements often come with interest rate rises, which increase the costs for borrowers. There are different ways to deal with high interest rates, but the key is understanding how and when these rates will rise.

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Economic Factors Influencing Interest Rates

Several economic factors could potentially influence the direction of mortgage interest rates in 2024. By considering these factors and understanding how interest rates are calculated, you can get a good idea of what's in the pipeline moving forward. So, let's go over these factors to glean some insights around what direction interest rates will go in 2024:

Inflation and Monetary Policy

Inflation remains one of the most potent influences on interest rates. When inflation rises, the Bank of England often increases rates to keep it under control. As the UK's economy rebounds post-pandemic, there is a potential risk of high inflation, which could push interest rates upwards.

Unemployment and Wage Growth

The health of the job market and wage growth also plays a significant role in interest rate adjustments. If unemployment decreases and wage growth increases, consumer spending will likely grow, potentially leading to inflation. In such a scenario, the Bank of England may raise interest rates to control inflation.

Brexit Impact

The long-term economic effects of Brexit remain uncertain, making it a wild card in forecasting interest rates. Depending on how the UK's trade relations evolve and how the economy adapts post-Brexit, this could either place upward or downward pressure on interest rates.

Government Debt

The state of the UK's public finances will play a critical role in the setting of interest rates. The government's debt has soared as a result of the economic support measures implemented during the pandemic and to a lesser extent the cost of living crisis. As we move forward, the government may need to manage this debt effectively to avoid increased borrowing costs. If the cost of servicing this debt becomes too high, it may push the Bank of England to raise interest rates to maintain foreign investor confidence and ensure the continued funding of the debt.

Global Economic Factors

The UK economy does not exist in a vacuum; it is interconnected with other economies worldwide. Events in the global economy, like a recession in a large economy (like in the US or China), or a global inflation surge, could have significant impacts on the UK economy and, by extension, the interest rates. If global conditions lead to reduced confidence in the UK economy, the Bank of England might respond by adjusting interest rates.

Housing Market Trends

The health of the housing market is another critical factor. If there is a boom in the housing market, with house prices rising rapidly, this could lead to inflationary pressures. The Bank of England may respond by increasing interest rates to cool the housing market. Conversely, if the housing market is weak, with falling house prices, the Bank might lower interest rates to stimulate demand.

Possible Interest Rate Scenarios for 2024

With the above factors in mind, there are a few possible scenarios for UK mortgage interest rates in 2024. Let's go over them:

Stable Rates

If inflation remains under control, the job market improves gradually, and the impact of Brexit is not drastically negative, we may see a period of stable interest rates. This would mean that the Bank of England would keep the base rate close to its current level, with minor fluctuations if necessary.

Rising Rates

However, if inflation picks up faster than expected due to robust economic recovery and higher consumer spending, the Bank of England might have to increase interest rates. What's more, if the impact of Brexit turns out to be strongly positive for the UK economy, it could lead to an economic boom, potentially causing interest rates to rise. Thankfully, there are a few ways to deal with high interest rates for your mortgage.

Falling Rates

On the other hand, if the economic recovery stalls, inflation remains low, and Brexit causes severe economic disruptions, the Bank of England might decide to lower interest rates even further to stimulate the economy.

Preparing for the Future of Interest Rates

While it's impossible to predict with certainty what will happen to UK mortgage interest rates in 2024, understanding potential influences can help us prepare for different scenarios. Current homeowners and potential homebuyers should keep a close eye on these factors and consider how various interest rate scenarios might impact their finances.

It is of utmost importance to remember that while we can make educated guesses, the final outcome will depend on a complex interplay of domestic and global economic factors. It is recommended for individuals to regularly review their mortgage plans with a financial advisor to ensure they are prepared for any fluctuations in interest rates.

If you'd like assistance with your mortgage, get in touch with our team at WIS Mortgages for free advice. Or, you can use our mortgage calculators to learn more about things like your mortgages overall affordability.

As a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repayments

Frequently Asked Questions

Q. What will mortgage interest rates be like in 2024?

A. Although it's impossible to know exactly how interest rates will change in the future, predictions are pointing towards a drop in rates towards the end of 2024. The start of 2024 looks to have high rates, but towards the end of the year they should dip, according to economists.

Q. How long will UK interest rates remain high?

A. Again, it's hard to say exactly how long we'll experience high interest rates - but we do have a few indicators. Predictions point to the base rate at the Bank of England rising to around 5.8 % by March of 2024 before slowly falling over an extended period.

Q. Is a 5-year fixed mortgage worth it?

A. A 5-year fixed mortgage could be beneficial, depending on what you're looking for. By opting for the 5-year fixed deal, you'll have a locked-in price that lets you effectively manage payments over an extended period. With that said, things can change over 5 years, so if the interest rates take a sudden drop then you could lose out on making some savings if you're tied to a fixed mortgage.

As a mortgage is secured against your home/property it may be repossessed if you do not keep up with the mortgage repayments

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