Are rates going down?

Will interest rates go down?

Yes, it’s likely that interest rates will go down - in fact, mortgage rates have already been decreasing since the start of August and are expected to continue. However, as the economy goes through periods of high and low inflation, interest rates will inevitably change. When inflation comes back down to a level the Bank of England deems appropriate, it will start to lower its base rate. This will have a furhter knock-on impact on the rates charged by other lenders, and should in theory result in interest rates going down even more. 

When will rates go down?

There are already signs that interest rates have peaked. The average 2 year fixed rate is now 5.95%, down from 6.85% at the start of August, while the average 5 year fixed rate is down from 5.57% to 5.66%. However, it's likely interest rates will remain high for a while, as the Bank of England is unlikely to lower its base rate until inflation reduces significantly.

How long will interest rates stay high?

How long interest rates will stay high depends on how the economy performs. The Bank of England has been consecutively increasing the cost of borrowing through repeated base rate rises over 2023, which has caused lenders to raise their own interest rates. Currently, the base rate is 5.25%, and interest rates are averaging 5.95% for 2 year fixed rate deals and 5.57% for 5 year fixed rate deals. But for the last two months, the Bank of England has voted to hold the base rate at its current rate and it's expected to gradually come down over 2024. This should mean that while interest rates could stay high until next year, they should continue to track downwards in response to the base rate decreasing.

However, it’s important to keep in mind that the ultra-low rates seen over the last few years are unusual. When you look at the last 30 years, interest rates between 4-5% are the norm, while periods of sub-4% are rare. Although interest rates are currently above 5%, once we reach levels of below 5% again then interest rates can be considered back to a “normal” level. 

If you are holding onto hope that rates will go back to the 1-3% deals seen during the pandemic before buying a home, you might be waiting a long time. Instead, consider ways to make your mortgage repayments more affordable through things like a longer mortgage term, bigger deposit, or boosting your mortgage affordability to get access to lower rates. 

Working out the best way for you to get on the ladder or remortgage to a new deal can be a minefield if you’re trying to suss it out yourself. That’s why it’s always best to get expert advice to find the best option for you. We’ve helped thousands of buyers and remortgagers discover how they could boost their mortgage affordability to buy sooner or remortgage onto a new deal.

Interest rates are accurate as of January 2024.