It’s been a whirlwind year for existing and potential homeowners after mortgage rates soared in the wake of the mini-budget at the end of September 2022.  

On the day of the mini-budget, the average two-year rate was 4.74%, but by the following Friday, the average deal was 5.17%, according to Moneyfacts.  

There have been several base rate hikes in 2023 in a bid to tackle stubbornly high inflation, which led to the average mortgage rate exceeding 6.5% during the summer. 

However, mortgage rates have recently been on a downward trajectory, so what’s changed? And will this continue into 2024? 

We’ll delve into what you need to know.  

Why have mortgage rates recently fallen? 

Mortgage rates have been falling thanks to positive inflation data and the belief that interest rates have peaked after the Bank of England (BoE) held the base rate for the third time in December.  

With some experts speculating that interest rates could be cut from March 2024, this is good news for homeowners.  

Swap rates have also been declining, which is based on where the market thinks interest rates will be in the future. This is significant as swap rates are used to price fixed-rate mortgage deals. 

Finally, as the housing market is now struggling due to high mortgage rates, lenders are incentivised to reduce their rates. 

The average two-year fixed mortgage rate for someone with a 40% deposit is around 4.8%, with some experts speculating rates could drop to around 4% by the end of 2023. 

Mortgage rate predictions 2024: will they go down? 

This is tricky to predict as mortgage rates are impacted by many factors such as inflation, interest rates, swap rates and so on.  

While many experts predict that the base rate will be cut next year, this depends largely on whether UK inflation continues to fall as expected.  

In November, UK inflation fell more than expected to 3.9%, which is the lowest inflation has been in over two years.  

Inflation is anticipated to keep falling in 2024 and may reach the BoE’s 2% target earlier than expected. 

As inflation has declined faster than expected this year, the BoE could start cutting the base rate in 2024 and possibly fall to 4% by the end of next year, according to data from private bank Berenberg.  

All these factors are good news for homeowners as mortgage rates are likely to keep falling, especially as the base rate directly affects variable-rate mortgage holders.  

If you have a variable-rate mortgage, it might be worth considering a fixed-rate deal. Unbiased can connect you to a qualified mortgage broker so you can find the best deal for you.  

On a final note, any forecasts should be treated as such, as many factors can change the direction of mortgage rates – and these will still be high compared to historic lows.

If you're looking to get onto the property ladder, you can check how much you could afford to borrow using our free mortgage calculator.