The 2023 Banking Crisis: What it means for Mortgage Interest Rates

Author: Prospect Tree Mortgages

Date: 27/03/2023

Since the outbreak of the pandemic in 2020 it’s felt like we have just been moving from one crisis to another. The current strapline on every journalists lips is ‘The 2023 Banking Crisis’.

Given the utter fallout that the last banking crisis caused in 2007/2008, we are without doubt that this current news story is likely to stir fear in the market. However, despite it’s obvious negative connotations, it would appear that this current banking crisis could actually be having a positive knock-on effect for consumers, at least for the time being!

What is the 2023 Banking Crisis?

Recently, there have been some problems with banks around the world. Two banks in the United States had to close, and a bank in Switzerland needed help from the government. Other banks are worried that this could spread and cause more problems.

Some banks that deal with cryptocurrency are also having problems, and one of them had to shut down. This made investors worried, and some bank stocks went down a lot.

The government and other big banks are trying to help and make sure that people’s money is safe. They are also looking at ways to prevent this from happening again in the future. However, some people are still worried about smaller banks and whether their money is safe if something like this happens again.

Overall, there are some problems with banks right now, but the government and big banks are working to fix them and keep people’s money safe.

Why are mortgage interest rates reducing?

Despite the ongoing crisis, mortgage lenders in the UK have actually been reducing the interest rates across the board. For many this seems counter intuitive, however there’s one big reason for this which most people aren’t talking about and that’s what we are going to discuss today.

Like any other business, mortgage lenders need to sell their products to keep making money. With far less people applying for mortgages this year, lenders are naturally expecting to make less money on the sale of their mortgage products.

So this leaves them with only a few options, they could spend more money advertising their services to try and attract new customers, or they could reduce interest rates so they are more competitive in the market and naturally win business this way.

Given the fact that in 2020 only 27% of consumers organised their mortgages directly with the lender, to just spend more money on advertising would be to neglect the 73% of consumers who will be seeking the services of a professional mortgage broker. This is due to the fact that a mortgage broker will be focused on securing the best deal for their client, and not distracted by a lenders expensive advertising campaign.

How a mortgage broker will help you get a great deal

When you speak to your bank, they will only advise you on the products they can offer their clients directly. On the other hand, a specialist mortgage broker will be able to advise you on a far wider range of products. Nonetheless, the mortgage broker will be able to use their position to negotiate the best deal and terms for your new mortgage.

Lenders know that mortgage brokers don’t care for fancy advertising campaigns, and instead are looking for the best criteria and deals for their clients circumstances, so they’ll often offer exclusive deals to that broker which they won’t even offer their customers directly.

Can brokers access the whole market?

To be sure you’re getting the best deal available to you, you need to be sure you’re looking at the whole market and not just a small section of it! We’ve already established that banks can only advise on their own products, so does this mean that all mortgage brokers can access all banks products? The short answer is no!

Many brokers are tied to specific panels, which despite being far more inclusive than single banks product range, it is still only a small fraction of what’s actually available.

Look for an ‘Independent’ broker

Finding a reliable mortgage broker you can trust isn’t a walk in the park – however, our top tip is to keep an eye out for ‘independent’ brokers. Independent brokers such as Prospect Tree Mortgages can access the entire intermediary market for you, which means you can be assured you’re not missing out on any products which could save you money on your mortgage.

Will rates keep decreasing?

If we knew the answer to this we’d tell you – but the only thing we can say with 100% certainty is that anything could happen. Mortgage rates change on a daily basis, and are affected by a wide slew of factors which makes them almost impossible to predict where they’ll move next.

However, one thing we can be certain about is our ability to help you secure the best mortgage available to you and your specific requirements right now! So if you’re interested in buying or selling a property in 2023, make a call to Prospect Tree Mortgages and be certain you’re getting the best deals available to you!