Rising Interest Rates? Here’s How to Find the Best Mortgage Deals in 2024

Rising Interest Rates? Here’s How to Find the Best Mortgage Deals in 2024

In the wake of rising interest rates, securing a favorable mortgage deal has become more challenging, but not impossible. With inflation, changing monetary policies, and uncertain economic outlooks, the mortgage market in 2024 is facing significant shifts. Whether you’re a first-time homebuyer, an investor, or someone looking to remortgage, finding the right mortgage can save you thousands in the long term. Here's a breakdown of how to navigate the market and find the best mortgage deals despite rising rates.

1. Understand the Market Trends

First, it’s crucial to grasp why interest rates are climbing. Central banks, including the Bank of England and the Federal Reserve, have been raising rates to combat inflation. In 2024, we’re likely to see continued tightening of monetary policy, meaning lenders will pass higher costs on to consumers. Fixed-rate mortgages, while more predictable, may become more expensive, whereas variable rates will track these increases.

Tip: Keep an eye on central bank announcements and broader economic indicators. This will help you anticipate further rate hikes and adjust your strategy accordingly.

2. Lock in a Rate Early

One of the best ways to combat rising interest rates is to secure your mortgage rate early. Many lenders offer "rate lock" options, allowing you to lock in today’s rate for several weeks or even months, giving you time to finalize your property deal without worrying about future rate hikes.

Pro Tip: If you're currently looking for a home, ask your mortgage broker about locking in a rate. Some deals allow for rate locks for up to 90 days, which can be critical during periods of rapid rate increases.

3. Consider Shorter Loan Terms

While longer loan terms often come with lower monthly payments, they may expose you to more interest rate risk. In a rising-rate environment, shorter terms (15- or 20-year loans) can save you money in the long run by reducing the overall interest you pay.

Tip: Use online mortgage calculators to compare total payments for different loan terms. A shorter term with slightly higher monthly payments could save you thousands over the life of the loan.

4. Shop Around for Lenders

It may sound simple, but many borrowers fail to shop around. Different lenders offer varying terms, fees, and interest rates, especially when market conditions are volatile. Make it a point to compare at least three to five lenders to ensure you're getting the best deal available.

Expert Tip: Mortgage brokers can access a wide range of deals that aren't always available directly to consumers. They can also negotiate better terms on your behalf, so don’t hesitate to enlist a broker’s help.

5. Opt for Hybrid or Adjustable-Rate Mortgages (ARMs)

In some cases, a hybrid mortgage—such as a 5/1 ARM (adjustable-rate mortgage)—can offer a lower initial rate. These mortgages typically have a fixed interest rate for the first five years, after which the rate adjusts annually. This can be a smart move if you plan to sell or refinance before the adjustable period kicks in.

Warning: While ARMs offer initial savings, they can be risky in a rising rate environment. Make sure you fully understand how much the rate can adjust and how often, so you’re not caught off guard.

6. Take Advantage of Government Programs

In 2024, several government programs could help reduce the cost of your mortgage, especially for first-time buyers. Schemes like the Help to Buy ISA or shared ownership may make it easier to secure a deal with a lower deposit or reduced interest rates.

Tip: Keep track of policy changes at both the national and local level. Governments often introduce new housing support measures in response to market pressures, which could help offset rising mortgage costs.

7. Improve Your Credit Score

Lenders offer the best rates to borrowers with excellent credit scores. If your score isn’t where it should be, work on improving it before applying for a mortgage. Paying down debt, avoiding new credit inquiries, and keeping your credit utilization low can all have a positive impact.

Tip: Check your credit score at least six months before you plan to apply for a mortgage. This gives you time to address any issues and ensure you qualify for the best possible rate.

8. Explore Offset Mortgages

An offset mortgage links your savings account to your mortgage. Instead of earning interest on your savings, the balance is deducted from your outstanding mortgage, reducing the amount you pay interest on. This can be a great way to save money if you have a substantial savings pot.

Example: If you have a £20,000 savings balance and a £200,000 mortgage, you’d only pay interest on £180,000. It’s a win-win: you reduce your mortgage cost without dipping into your savings.

9. Work with a Mortgage Advisor

Navigating a rising-rate environment requires expert knowledge, and a mortgage advisor can help you cut through the confusion. They can recommend the best mortgage products based on your personal circumstances, future financial goals, and the latest market developments.

Tip: Look for an advisor who is independent, meaning they are not tied to any particular lender. Independent advisors have access to a broader range of products, giving you a better chance of securing a good deal.

10. Negotiate Closing Costs and Fees

In addition to interest rates, the fees associated with your mortgage (such as application fees, appraisal costs, and closing costs) can add up quickly. Many lenders are open to negotiation, particularly if you’re a strong borrower or they’re trying to attract new clients.

Pro Tip: Ask your lender about waiving or reducing certain fees, especially if you’re putting down a larger deposit or have excellent credit. Every little bit helps when rates are rising!

Final Thoughts

Though rising interest rates in 2024 pose challenges for buyers and investors alike, there are still ways to find the best mortgage deals. By staying informed, shopping around, and considering alternative mortgage options, you can secure a loan that works in your favor. Be proactive, improve your credit, and seek expert advice to navigate this dynamic market with confidence.