Understanding Mortgage Rates and Interest Rates in the UK: September 2024 and Beyond

As we enter the final few months of 2024, the UK mortgage market is continuing to experience significant shifts. If you’re looking to buy a home or remortgage, it’s important to understand how mortgage rates and interest rates work, and how they’re likely to change.

Let’s have a look at what’s currently going on in the world of mortgages and why now is the time to consult with your mortgage advisor.

As you will be aware, the UK mortgage market has been navigating a challenging economic environment over the past couple of years. The Bank of England (BoE) has consistently adjusted the base interest rate in response to ongoing inflation concerns and global economic pressures – leaving many homeowners facing significant rises in their mortgage interest rates. Although things seem to be heading in a more favourable direction, as of September 2024, the BoE’s base rate sits at 5%, a level that remains subrationally higher compared to pre-2022 rates. While inflation has started to cool down slightly, the UK’s economy still faces significant challenges.

These high interest rates have directly impacted mortgage products. Lenders have been adjusting their offers, and mortgage rates remain notably higher than what borrowers had become accustomed to in the last decade.

Recent research by Right Move suggests the current average mortgage rate for a five-year fixed rate mortgage is 4.68%, and the current average rate for a two-year fixed rate mortgage is 5.04% – both are down from previous rates. While we’re not seeing the extreme highs of 2023, these rates are significantly higher than the ultra-low rates seen pre-pandemic.

Several key factors are influencing the mortgage market right now:

Inflation Control: The Bank of England’s main goal in keeping the base rate high is to manage inflation. Although inflation has started to fall, the BoE has indicated that it may keep rates elevated for longer than initially expected to ensure inflation is fully under control.

Global Economic Pressures: Global events affecting the energy market and contributing to higher costs and geopolitical tensions continue to impact the cost of borrowing. The uncertain economic outlook means lenders are factoring more risk into their pricing, leading to higher mortgage rates.

Lender Caution: Lenders are being cautious – which makes for a fast moving market. It makes sense that because of the high rates many have adjusted their affordability criteria, with increased scrutiny on borrowers’ income and expenditure. However, alongside this we are seeing new deals coming to market all of the time.

While some financial analysts predict that the BoE will continue to reduce the base rate, others suggest the chances of any significant cuts before the end of 2024 are slim. This might mean mortgage rates are likely to remain at current levels for the remainder of the year. However, with economic uncertainty still looming, there’s a possibility that rates could fluctuate slightly. The truth is, no one really knows what’s going to happen next or what the future holds.

For those with fixed-rate deals expiring soon, the prospect of remortgaging at a higher rate can seem daunting. Yet, the market is not all doom and gloom. There are many competitive deals available and new one’s coming to market all the time.

Given the uncertainty and complexity of the current market, now is a crucial time to speak with a professional mortgage advisor such as ourselves, and here’s why:

 

1. Tailored Advice: Every borrower’s situation is unique. Whether you’re a first-time buyer, a home mover, or someone looking to remortgage, a mortgage advisor will help you understand which products best suit your needs. Advisors have access to a wide range of mortgage deals, including those that aren’t always visible on the high street or online.

 

2. Understanding Affordability: With tighter affordability checks in place, a mortgage advisor can guide you through how much you can realistically borrow and the potential impact of interest rate changes on your repayments.

 

3. Expertise in Navigating the Market: Mortgage advisors stay up to date on market trends, lender policies, and upcoming changes in regulation. They can provide invaluable insight into when to lock in a rate, which product to choose, and how to structure your mortgage to protect against further rate increases.

 

4. Exclusive Deals: Some lenders offer exclusive mortgage deals that are only accessible through mortgage advisors. By consulting with your advisor, you may gain access to lower rates or better terms that wouldn’t be available to you directly.

 

5. Save Time and Money: Shopping for a mortgage on your own can be time-consuming and confusing. A mortgage advisor takes the legwork out of comparing hundreds of products, ensuring you find the most cost-effective and suitable option for your circumstances.

As we move towards the end of 2024, the UK mortgage market remains complex. As much as the experts attempt to predict what’s going to happen, we are not in control of events which may keep things as they are or increase them. For that reason, it’s essential to understand your borrowing options and to seek expert advice tailored to your unique circumstances and financial situation.

At Kingsbridge Mortgage Advice, we’re here to help you navigate the mortgage market and find the right deal for your unique circumstances.

Whether you’re looking to buy your first home, move up the property ladder, or remortgage to secure a better rate, speaking with one of our mortgage advisors can make all the difference.

Contact us today to discuss how we can help you plan for your financial future with confidence.