What Will Happen to Interest Rates?

A couple looking at the window display of an estate agents
Author: Samuel Beckingham
Updated: Jan 31, 2024
4 minutes read

As inflation has been steadily falling, banks have increased competition for mortgage rates, giving homebuyers renewed confidence in the market. However, since the news about inflation unexpectedly rising by 0.1% in December, Santander has bucked the trend and increased its mortgage rates.

Santander Rates

Some of the fixed rate mortgages on offer from Santander will increase by 0.2%. This is after inflation reportedly rose to 4% in December. Economists and analysts alike believe this increase is a decision based on various levels of uncertainty, especially as it’s expected the Bank of England won’t cut rates as early as first thought.

Reductions Elsewhere

HSBC, NatWest, Metro Bank and TSB have recently announced reductions to their mortgage rates, which brings the average two year fixed deal to 5.62%. At the start of the year, the average was around 5.93%.

Economists have stressed that the wider public shouldn’t be worried that Santander is going the other way because inflation and the Bank Rate are both expected to fall as the year progresses.

Deals Coming to an End

It’s estimated that around 1.6 million people have relatively cheap fixed rate mortgages at the moment. However, these are due to come to an end at some point this year, and homeowners will have no choice but to stomach increased costs at the going rate.

If another mortgage isn’t agreed, a variable rate will automatically take over, which would stand at around 8% or more. For anyone on a 2% deal, this would be catastrophic to their disposable income.

Inflationary Pressures

There have been concerns about the current issues faced in the Red Sea. Various supply issues could cause pressures that would impact the economy and bring about an escalation to inflation once more, as well as stagnating economic growth. This would then lead to mortgage rates increasing again.

According to Dr El-Erian, economic adviser at Allianz, such shocks would not be as big as what was seen in 2021 and 2022. At a time where inflation was beginning to get back under control, it’s unfortunate timing.

Despite this uncertainty, most economists are hopeful that inflation will fall and the Bank of England will cut rates several times this year alone. It’s these predictions that are fuelling the cut in mortgage rates. Santander, however, says it focuses on a wide number of elements which it uses to adjust rates.

Offset Mortgage Rate Increases

If you’re about to be hit with a big mortgage increase, there are some ways in which you can offset some of these costs. Even if you’re not, we can still help you get money back.

Unaffordable Lending

Lenders have been guilty of increasing credit limits without proper consent, or even granting it without suitable checks. If you’re a victim of unaffordable lending, you can be reset to where you were before these increases and receive compensation for your trouble.

Mis-sold PCP

Whether you owned a car through personal contract purchase or hire purchase, you may not have been reliably informed about various details to do with the agreement. This could include high levels of commission.

Flight Delay

A plane can arrive late to its destination for various reasons that are within the airline’s control. If you’ve been on a flight that was delayed for at least three hours, you could be entitled to make a claim. The highest amount available is £520 per passenger.