Mortgage Rates in 2023 – What’s the Story so far?
Written by Prospect Tree Mortgages
Updated 03/04/2023
The UK mortgage market is a rapidly changing landscape, and understanding what lies ahead is important for homebuyers and property investors. This article will look at the mortgage rates of 2023, what has happened so far, and what we can expect in the coming months. We will examine the key dates and events in the 2023 calendar to make predictions about what the future may hold for mortgage rates. By looking at the current market trends, historical data, and future predictions, we can gain a better understanding of what to expect in the UK mortgage market in 2023.
If you’re looking for specific advice about your personal situation then get in touch with us for a bespoke quotation. Don’t worry we don’t charge for our advice, so you can gather all of the information you need before deciding to proceed.
The perfect storm
It’s no surprise that mortgage rates are as high as they are right now. A brief look back shows us that mortgage rates in the UK have been subject to many influences which have left us staring at some of the most expensive mortgage products we’ve seen on the shelves since 2009.
During the Pandemic, the Bank Rate (also known as the Base Rate) was decreased to a record low of 0.1% – The Bank of England did this in order to stimulate the economy and encourage businesses to borrow money and invest back into the economy. This was a response to the significant decline in economic activity which resulted from the outbreak of the pandemic.
A lower Bank Rate meant that money was cheaper to borrow and benefitted less from savings interest. This alone encouraged spending, and when additional government incentives such as ‘Eat out to Help out” were added into the mixing pot a nationwide spending spree ensued.
If England’s economy was to bounce back as our now Prime Minister promised, then this was exactly what we needed to see. However, there was a 6,000 kilogram elephant in the room who was getting ready to spoil the party.
Even without the pandemic, getting produce into the UK had become an expensive challenge. Increased taxes, additional paperwork and workforce shortages were already slowing down supply lines and inevitably increasing the final price us consumers paid for the same products.
So, what do you get when you combine the massive demand for products, increased costs, cripplingly slow supply chains and high demand? Not the punchline for a joke, that’s for sure, you get price rises.
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With prices beginning to rise so quickly, the Bank of England needed to respond. If inflation was allowed to continue surging upwards then the country would soon face even bigger problems. One way the Bank can fight back against inflation is by decreasing the demand for spending. This was their goal when they voted to begin increasing the Base Rate in December 2021.
Since then, the Base Rate has been increased a further ten times and it currently sits at 4.25%
Base Rate Changes
The higher Base Rate means that mortgage lenders are now paying higher rate of interest for the money they borrow. Obviously mortgage lenders need to charge more on their lending than they’re paying for their own borrowing, otherwise they’d be out of business.
2023 Banking Crisis: What it means for mortgage rates
The 2023 banking crisis has caused some problems with banks around the world, but the government and big banks are working to fix them and keep people’s money safe. Despite the crisis, mortgage interest rates in the UK have been reducing because mortgage lenders need to sell their products to keep making money. They can either spend more money advertising their services or reduce interest rates to be more competitive in the market.
A mortgage broker can help you get a great deal by advising you on a far wider range of products and using their position to negotiate the best deal and terms for your new mortgage. Independent brokers can access the entire intermediary market for you, which means you can be assured you’re not missing out on any products that could save you money on your mortgage. While mortgage rates change on a daily basis and are affected by a wide range of factors, you can be certain that a reliable mortgage broker like Prospect Tree Mortgages can help you secure the best mortgage available to you and your specific requirements right now. Visit our contact page to find out how to get in touch.
Will Mortgage Rates come down in 2023?
Some mortgage lenders have already announced rate cuts in 2023. This is encouraging news, however we should not assume that this signifies the start an overall market trend. Instead we should take this news as a positive sign that lenders are beginning to feel more confident and comfortable in this new market.
We need to also remind ourselves that lenders are constantly competing with each other to win business. Some lenders increased their rates by so much that they priced themselves out of the market and it could be that these cuts are just a bid to be more competitive.
At Prospect Tree Mortgages we are delighted to see two heavyweight lenders cut their rates. We hope to see others follow suit as they bide to remain competitive.
Will the Base Rate be increased again?
Votes for increasing the Base Rate have held less of a majority the higher it has become. This isn’t to say that it will remain at 4.25% though. The next Monetary Policy Committee meeting is booked for the Thursday 11th May 2023 and we will have to wait until then to find out what the next move is.
Cost vs Competition
Property experts are forecasting a slow year for the property market. Speculative figures suggest that transactions will be down as much as 20% compared to last year. 20% less purchases will have a direct impact on lenders revenue if they have the same market share as they did in 2022. This impact could lead to increased competition for the top spot as lenders try to undercut each other to take a bigger piece of the diminishing pie.
Update 03/04/2023
So far the year is panning out as expected, with February 2023’s mortgage approvals being a third lower than they were this time last year, only intensifying the competition between lenders. This competition is proving to have positive impacts already, with mortgage approvals edging slightly higher than expected in February 2023.
So in part it comes down to cost vs competition, lenders will be discouraged from overly inflating their rates in order to stay viable to consumers – viable also means profitable so if the Bank Rate increases then we should expect mortgage rates to continue on their upwards trajectory.
One things for sure! Prospect Tree Mortgages are here to keep you up to date with all of the latest mortgage industry news and insights. As independent mortgage brokers we have the ability to sample rates from the entire market to bring you the most up-to-date news.
If you’re applying for a mortgage in 2023 then you should definitely speak to Prospect Tree Mortgages. We’ll help you find the mortgage which suits you best and help you keep your costs as low as possible.
How to get in touch
There are a few ways to get in touch with us. If you want quick assistance and personalized advice based on your specific circumstances, calling us is the best option. On the other hand, if you have a specific question, you can email us and we’ll get back to you as soon as possible.
If you’re ready to get started outside of office hours or want to begin your mortgage journey right away, you can click ‘start now’ and complete a brief questionnaire. This will help you get the answers you need and take the first step towards securing your dream home.
And don’t worry about the cost of our advice. It’s completely free, as we only collect a success fee once you’ve received your mortgage offer. This means you can talk to us, compare rates, and take advice without any financial commitment, giving you the confidence to make the best decision for your future.