Reducing interest rates: what does it mean for buyers and those whose fixed term ends in 2024?

Already, 2024 is proving to be a more promising year for the property market.

Despite inflation increasing slightly, interest rates for fixed-rate mortgage products have started to come down, which indicates that lenders are optimistic about what the future holds.

In her latest article, our mortgage and protection specialist, Emma Crocker, outlines what this means for those looking to make moves in the property market this year, as well as the effect that this could have on the property market as a whole moving forward.

If your mortgage product expires this year or you’re thinking about buying, the recent interest rate reduction is welcome news that positively affects many. As a mortgage broker, seeing interest rate percentages that start with a 3 – rather than a 4, 5 or even 6 – is a great sign that things are heading in the right direction.

While property owners know that this is good news, announcements and news stories can be full of industry jargon and fail to properly communicate why this is good news, and how people can stand to benefit. As a result, I have compiled my key thoughts on this development and what this actually means for you and the market.

More for your money

The main benefit that people will be happy to hear is that, fundamentally, an interest rate decrease will make your money go further. First-time buyers, those whose mortgage product is expiring and those moving house therefore have an opportunity to save money on their fixed monthly payments and get more for their money, compared to recent years.

In times where salaries are stretched and economic uncertainty is high, being able to save money for things like renovations, furniture, holidays, or even just a mid-month treat is a welcome luxury.

The value of using a mortgage broker:

Constantly scouring the market for the best value can be a complex, time-consuming task to undertake alone. A mortgage broker will track rate changes for you and proactively secure you the best deal before you complete.

Shorter fixed terms may make a comeback

With rates already dropping and expected to carry on doing so, shorter-term mortgage products may now be a better option for you depending on your situation. When the future of mortgages was less certain, many opted for 5+ year fixed terms to ensure some level of long-term consistency, whereas now people may wish to consider a shorter term so they’re able to benefit sooner from lower monthly repayments, should interest rates continue to drop.

That being said, many still prefer a longer term because it helps them with budgeting further into the future – it could cost you more over the term of your mortgage, but your payments won’t fluctuate, making monthly budgeting a lot easier. It’s completely down to personal preference, but shorter-term mortgages are certainly becoming more appealing.

The value of using a mortgage broker:

Mortgage brokers have access to up-to-date market predictions . which allows us to assess your situation and give informed advice on what options may be best for you and your future.

Effects on the market

With money now going slightly further, more people can afford to make their move in the property market, potentially meaning more first-time buyers and those looking to move house may be able to take the plunge. This increase in activity should help to breathe life into what has been a pretty stagnant housing market of late; with an increased demand for housing, property prices could eventually go up, as could the amount you can borrow for your mortgage.