With phrases such as ‘mortgage wars’ and ‘race to the bottom’, both of which are being used to describe lenders’ current drive to cut mortgage rates, it’s easy to overlook why mortgage rates are falling in the first place. After all, the Bank of England’s (BoE) base rate isn’t going down.

So, what exactly is happening?

The significance of sentiment

When it comes to the financial markets, sentiment counts. So much so, in fact, that entire decisions – big decisions, too – are based on it.

As a Guildford mortgage broker that’s been in business for almost two decades, we’re still amazed by how much sentiment moves the markets. And what’s been happening in the first few weeks of 2024 is no exception.

Essentially, investors have now become confident that the BoE has increased the base rate enough to bring inflation back in line. Analysts are even predicting that the base rate will fall soon, too, which is giving the markets extra confidence.

Of course, the UK saw a slight uptick in inflation the other week (up to 4.0% in December from 3.9% in November), but as Jeremy Hunt said in response, ‘inflation doesn’t fall in a straight line’.

So, positive sentiment and renewed confidence are bringing down swap rates, which we’ve covered here. And when swap rates go down, so do mortgage rates.

Will mortgage rates continue to fall in 2024?

If there’s one question that our team of Guildford mortgage advisers are being asked right now, it’s this. And it’s a fair question.

Of course, we don’t know what the answer is. However, we suspect that fixed rate mortgage rates will eventually level off somewhere between 3.50% per to 4.50%. They certainly won’t hit 2020/2021 levels again – not for a very long time, at least.

So, should you wait for better rates? In our view, no. The levelling off is likely to have taken place by mid-February. The Bank of England’s Monetary Policy Committee has voted 6-3 to maintain the base rate at 5.25%.  Two members voted to increase the base rate by 0.25%, while one member preferred to reduce the base rate by 0.25%.  If it goes up in March, then this could unsettle lenders leading to an increase in mortgage rates.

Remember, you have six months to accept a mortgage offer. So, if you receive a mortgage offer today and rates decrease between now and when you need it, we’ll switch you to a better mortgage rate. But if you don’t have a mortgage offer and rates do go up, then you’ll probably kick yourself.

Get in touch with our team of mortgage brokers in Surrey today and we’ll walk you through your options.

Looking to find the best UK mortgage deal? Contact our team on 01483 238280 or by e-mailing info@complete-mortgages.co.uk.