Navigating the Mortgage market in 2024: to fix or to track?
In this short blog, we look at the 2024 UK mortgage market, with some insight into whether it is better to fix your rate or possibly to track. Homeowners and prospective buyers will naturally be contemplating what is going to happen with mortgage rates this year. The housing market is a dynamic landscape, which is influenced by an array of economic factors. Understanding what is likely to happen is crucial, especially for households where rates are set to expire in the coming months.
The current landscape looks stable, however there are influences. January has seen the mortgage market remain relatively stable, with the general trajectory being a decrease in rates, with lenders competing for market share. The Bank of England has maintained the base rate, which has fostered an environment of lower interest rates. However, predicting the future trajectory is like navigating a ship through unpredictable waters. There are several factors, such as inflation, economic growth, and global events that can quickly sway interest rates.
There is renewed confidence, however as we have seen over recent years with the likes of, the financial impact of the Covid pandemic and Russia’s invasion of Ukraine. World events can impact quickly, and we cannot always predict with certainty what is going to happen.
Many commentators are predicting that the UK will see a drop in the bank base rate as early as May, whilst others are being more cautious and are suggesting possibly the base rate may drop in August.
Fixed-rate mortgages: certainty in uncertain times
If you are approaching the end of a fixed-rate mortgage within the next 6 to 12 months, or contemplating buying your new home. The question arises, to fix or not to fix? Opting for a fixed-rate mortgage provides a certain level of financial stability. With a fixed rate, you can lock in your rate at a specific interest rate for an agreed period. The benefit is certainty of payment for the fixed rate period and being shielded from the volatility of any future rate increases. The downside, if rates drop even further, you are potentially paying more than the current deals available.
Therefore, the advantage of fixed-rate mortgages lies in predictability. Regardless of market fluctuations, your mortgage payments will remain constant. This can be particularly advantageous in times of economic uncertainty, if interest rates are on the rise, or you prefer to know exactly what you are paying and can budget.
Tracker rate mortgages: Riding the waves of change
On the flip side, tracker rate mortgages offer a different strategy. This type of mortgage is tied to the Bank of England base rate, meaning that as the base rate fluctuates, so does your tracker rate. Meaning, that if the base rate rises by not .25%, then the following month the tracker rate mortgage would have increased by 0.25%, meaning an increase in monthly payment. Equally, this works in reverse, and if the base rate is on a downward trajectory, this means that your mortgage payments will follow suit.
Choosing a tracker rate mortgage requires a degree of comfort with uncertainty. Whilst you may benefit from lower rates if the base rate remains stable or decreases, there is the inherent risk that it may impact and increase your monthly mortgage payments.
The Crystal Ball conundrum
Predicting the exact trajectory of mortgage rates is an extremely challenging feat. Economic conditions can shift, and global events can send ripples through financial markets. Financial experts will generally advise homeowners to assess their risk tolerance and financial goals when making decisions. A consideration is how tight is your household budget. If your budget is relatively tight, you may be better off fixing your mortgage and giving yourself certainty and peace of mind. On the other hand, if you have more flexibility in your budgets, then a tracker rate could be of benefit, especially if the commentators are right and the bank base rate starts to drop.
Seeking professional guidance
Whether you lean towards fixing or tracking, seeking professional advice is important. MMPE as a broker can provide you with insights tailored to your specific situation, helping you with making informed decisions aligned with your financial objectives and circumstances.
In conclusion, the UK mortgage market in 2024 is characterised by stability, but the future remains uncertain. Homeowners with rates coming to an end, and home buyers need to weigh up the pros and cons of fixing or potentially using tracker rates or variables. Consideration being given to, risk tolerance, household budgets and financial goals.
Professional advice is a valuable compass in navigating uncertain waters within the mortgage landscape.
If you would like to discuss your mortgage options with on of our independant advisors, please use the link below to schedule a convenient time for you.
