How to plan your next move in the property market with changing mortgage rates
As the property market has continued to adjust over the past 24 months in the aftermath of economic policies, navigating mortgage rates has become a critical consideration for both homeowners and prospective buyers.
The rise in the base rate over the past 18 months has led to uncertainty, but, following a recommendation by the IMF (International Monetary Fund), earlier this year, a reversal is already happening. With inflation at sub two percent, we can expect a large drop in rates to as low as 3.5% by the end of 2025.
Mark Lawrinson MNAEA MARLA, Operations Director, Residential Sales at Beresfords Group and Director at Flagstone Financial, said: “For those planning their next property move, it’s essential to stay informed and strategic. Lower mortgage rates present opportunities, but with ongoing inflationary pressures and fluctuating house prices, careful planning is key. Whether you’re looking to sell, buy, or remortgage, here are five important considerations to help you make the best decisions in today’s shifting market.”
- Keep an eye on mortgage rate trends
Although mortgage rates have been fluctuating since the Truss/Kwarteng ‘Mini-Budget’, they haven’t reached the extreme highs of 9% as predicted in some reports. We believe that, over the coming months, we could see the Bank of England bring the base rate as low as 3.5%. As a result, lenders may start offering rates as low as 3%, giving buyers a more favourable window. Monitoring these shifts is crucial when timing your move. - Understand lender competition
Despite market volatility, mortgage providers remain competitive. Lenders need to continue offering attractive products to stay profitable, which means that even in a tighter market, there are often deals to be found. Engaging with a mortgage advisor, like our team at Flagstone, can help you navigate the various options and find a product that suits your circumstances, whether you’re buying or remortgaging. - Be strategic with Fixed vs. Variable rates
With the potential for interest rates to drop over the next year, the decision between locking in a fixed-rate mortgage or opting for a variable rate becomes more significant. A fixed-rate mortgage provides stability, but as rates lower, a variable rate could offer better savings. Predominantly we are used to seeing five-year fixed mortgages as more favourable, but we may start to see a switch to two-year fixed mortgages becoming more popular. It’s important to assess your risk tolerance and financial plans before deciding. - Factor in house price movements
As interest rates change, so too do house prices. Historically, falling mortgage rates can drive up property demand, leading to price increases in certain areas. If you’re planning to sell and buy again, consider how local market conditions and upcoming rate changes might impact your buying power. Doing market research on areas experiencing growth or stagnation can help you make a smarter choice. - Plan for long-term financial stability
Even with optimistic projections for lower rates in 2025, it’s important not to overextend yourself. Inflationary pressures are still a concern, and with the need to maintain economic stability, rates may not drop as dramatically as hoped. Setting a budget that accounts for both current and future potential market changes is key to ensuring you can sustain your financial commitments over time.
As the property market continues to shift, staying informed and adaptable is crucial to making the right decisions. While the potential drop in mortgage rates offers exciting opportunities, it’s important to balance short-term gains with long-term financial security. By carefully considering market trends, lender competition and your own financial goals, homeowners and potential buyers will be best positioned to make the most of this evolving landscape.
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