By Mark Dickety on



The Bank of England held the interest rate at 5.25% in December, increasing hopes that rates may have peaked for consumers and financial markets. Swap rates have fallen for five months in a row as market stability grows, giving confidence to lenders. The average five-year swap rate was 4.32% in December, having fallen from 4.48% in November and 5.25% in July (Octane Capital).

Mortgage rates are continuing to fall, off the back of lower interest rates, an encouraging sign for potential buyers, and this is likely to continue across all loan-to-value ratios throughout the early part of 2024. Lenders have new targets at the start of the year and are in competition for market share. Several large lenders reduced their rates earlier this week, including HSBC, who are now offering a five-year deal under 4%. Average two- and five-year fixes fell between the start of December and the start of January, to 5.93% and 5.55% respectively, the last time these were below 6% was in June 2023 (Moneyfacts). Appetite for tracker deals and two-year fixes has increased as most consumers think rates will continue to drop and prefer to have flexibility.

Product choice rose for a sixth consecutive month, to 5,899 options in January, from 5,694 in December, the highest level of availability in over 15 years. Volatility in the market is stabilising as the average shelf-life of a mortgage product increased to 21 days, the highest level since June (Moneyfacts). Many lenders have also brought down their levels of stress testing and are less rigid on affordability constraints, opening up a wider range of mortgages for more people.

Amid easing inflation and rising optimism, consumer confidence increased two points higher in December (GfK Consumer Confidence Tracker). Mortgage approvals hit their highest level in six months, reaching 50,067 in November, up 9.9% year-on-year (Bank of England). Net approvals for remortgaging also grew, to 27,000 in November from 24,000 in October (Bank of England). Renewed demand for mortgages as rates drop, combined with the usual January seasonal uplift, is already evident.

Although affordability is improving, around 900,000 borrowers will see their monthly mortgage repayments increase by more than £500 in 2024, when they come of lower fixed-rate deals. Around 20% of these could see a monthly increase of over £1,000 (Bank of England). However, due to the competition among lenders, the financial hardship might not be as pronounced as previously expected.

The buy-to-let market has seen significant mortgage cuts over the past few months as lenders are trying to stimulate the market and bring more people in. The average rate for a five-year fixed buy-to-let mortgage is 5.19% and two-year 5.38%, down from 5.87% and 6.22% in July respectively (Bank of England). This approach is likely to continue throughout 2024, with buy-to-let rates being cut.

Although the general anticipation is for the Bank of England to maintain the interest rates at 5.25% for the next few months, the majority of experts predict a decrease this year, driven by positive inflation reports. This could intensify competition among lenders, boosting confidence within the housing market.


Disclaimer: The above is for information only. Independent regulated financial advice should always be sought when considering mortgage matters.

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Mark Dickety
Mark is an experienced Mortgage and Protection Adviser who has been providing mortgage advice since 2010. He thrives on finding the right solution for each of his clients' requirements ensuring they have the best experience possible.
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