Is now the time to switch your variable rate mortgage to a fixed-rate product?

Adrian Anderson - Anderson Harris

Home » Is now the time to switch your variable rate mortgage to a fixed-rate product?

Published: 30th January 2024

This Article was Written by: Adrian Anderson

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A new year is underway, and for many in the property market there’s hope that 2024 will be significantly better than its predecessor. Following recent falls, property prices are expected to stabilise, and interesting things have already been happening in property finance.

While the Bank of England has held the base rate at 5.25% since September, the end of 2023 and the start of 2024 have experienced much welcome falls in fixed-rate mortgage prices.

With 2-year fixed terms currently on offer for around 4.34% with a £999 product fee and 5-year fixes currently available for 3.84% with a £999 product fee, there’s now a significant difference between these and the Bank of England base rate tracker products. The cheapest tracker product on the market is circa 5.39% pay rate (0.14% + base rate) with a £999 product fee. These rates are all only available at circa 60% Loan to Value (LTV).

While any rate reduction is most welcome, those looking to remortgage or purchase in the short-term still face some careful consideration when weighing up their options.

Important considerations

Common questions we are currently being asked are:

  • Will the base rate fall, and if so, when and by how much?
  • Are fixed-rates likely to fall further, if so by how much and when?
  • If I wait for fixed-rates to fall further how much extra am I paying on my variable rate in the meantime.

While nobody has a crystal ball, many experts expect the base rate will reduce in 2024 – potentially to around the 4.25% mark by December, however there are many different factors that could have an impact on the base rate falling by less or more.

Recently, December 2023’s inflation rate made a surprising marginal rise to 4% (up from 3.9% in November). Looking longer term, many economists feel that a likely reduction in energy bills in 2024 will cause inflation to fall bringing likely base rate cuts along with it.

Despite the current disparity between tracker and fixed-rate prices, the markets are still very sensitive to economic data. The recent fixed-rate price falls indicate that Bank of England base rate reductions are on the horizon. It’s yet to be seen though whether these fixed rate mortgage products will fall further in coming weeks, or have reached their limit for a while. A good indicator may be the market’s response to the Bank of England’s next base rate decision on 1 February.

Making the fixed vs tracker decision

Deciding between a fixed or a tracker product in the current climate very much depends on an individual’s financial circumstances and commitments for the next few years.

The high cost of living is still biting for many and is not being helped by the fiscal drag and frozen tax thresholds, which are pushing people into higher rate tax brackets.

Many borrowers opted for tracker products last year and in Q4 of 2022, hoping the base rate would drop. As it hasn’t fallen as much as people had hoped, the opportunity to move to a lower-rate fixed product will be most welcome.

Also, with an election this year and the uncertainty that brings, some may welcome the certainty that current fixed-rate prices bring. For others, there may be a more ‘wait and see’ attitude in case the base rate falls more than expected – which in turn could lead to even cheaper fixed-rate products being offered.

Either way, it is sensible to talk to an independent mortgage broker if you are considering changing your mortgage arrangements soon. They can explore different scenarios based on your unique circumstances and discuss options.

This could include obtaining a mortgage offer letter for a fixed product from a lender, which you can draw down in the next three/six months – keeping your options open for a little longer.
Many mortgage lenders should allow you to request a cheaper fixed-rate before the mortgage has drawn down, so you can chase the fixed-rate price falls.

Can we help?

While the start of 2024 has brought some positive signs in the mortgage market, it’s still too soon to predict how low rates will fall in the coming months and there are bound to be some bumps in the road.

If you’re currently weighing up trackers versus fixed-rate mortgage products, talk to our specialists. We can give you expert advice to help you make an informed decision, and find the right deal for you. Contact us on +44 (0) 20 7495 6633 or e:

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