Lenders are locked in a battle for market share that will spill into 2024.

The Bank of England opted to hold the base rate at 5.25% on Thursday, the third consecutive pause.

By opting to hold, the Bank of England has signalled that interest rates are likely now at a sufficient level to bring the annual rate of inflation back to the 2% target. That’s not to say the Bank won’t vote to hike again: Governor Andrew Bailey has consistently warned that further tightening may be necessary if the rate of inflation begins picking up again, but that looks more unlikely with each month that ticks by.

The outlook for mortgage rates

Mortgage rates have been easing since late July, which has underpinned a pick-up in housing market activity. It’s very likely that mortgage rates will ease further in the new year, according to Simon Gammon, Managing Partner, Knight Frank Finance:

"The mortgage market is getting quiet as we approach the Christmas lull, but we expect mortgage rates to keep easing through January. The lenders are locked in a battle for market share in a subdued market, and they will return in January with fresh targets, eager to make some headway.

"That said, we expect these mortgage rate cuts to be pretty small because the lenders' margins are already thin.

"Mortgage rates should fall through 2024. If the Bank of England cuts the base rate during the year as financial markets expect, we think borrowers will be able to access mortgage rates starting with a three by the end of the year.

"For now, the lenders are being particularly aggressive in keeping current customers. Even those that usually work hardest to secure new customers are switching strategies. Retention deals are particularly attractive in the current market."

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