Will Interest Rates Fall This Year?
Chestertons’ Research Analyst David Rees shares his interest rate predictions for 2024:
The Bank of England held interest rates at 5.25% in December, marking a third successive period where rates remained unchanged, following 14 successive interest rate hikes since December 2021, which pushed rates to a 15-year high.
The rate freeze will benefit existing mortgage holders and potential buyers because the Bank of England’s base rate serves as a benchmark for mortgage rates. Higher base rates increase borrowing costs for banks, prompting them to raise mortgage rates, while lower base rates make borrowing cheaper, encouraging banks to offer lower mortgage rates.
Unsurprisingly, the cost of borrowing increased significantly between December 2021 and July 2023 as the Bank raised interest rates, with mortgage rates rising from around 1.5% to over 6% at the high point in July 2023. As the prospect of another rate rise by the Bank of England receded, mortgage rates started to fall to an average of between 4.5% and 5.6% in December.
