Mortgage Market Update 2023

Here you will find the latest mortgage market update for 2023. Updated weekly with the very latest on mortgage rates, mortgage lender changes, and general property news, this builds up as an informative resource to track changes in the market over the year.

To find out more, ask questions, or speak to Monty or one of our friendly mortgage experts click here.

 

1st February Bank of England Base Rate Decision

This week all eyes are on the Bank of England to see if they will increase interest rates once more. The smart money suggests that we will see the last larger rise of another 0.5% to take the Base Rate to a nice round 4%.

So much depends upon not the next moves by the Bank of England, but on the rhetoric that accompanies it. Although there could even be another move after this to 4.25%, I personally do not see the need to move any further at all, but the stubbornness of inflation, the fact that wage inflation is bothering the Bank and that the recession may not be as bad as predicted, or even appear at all, means there is some caution.

Maybe there will be a surprise of just a quarter point rise, but we shall know soon enough.

Either way, these rises are already priced into existing mortgage rates and I still expect rates to fall overall from mortgage providers as competition and the desire to lend takes a more serious hold.

As I mentioned to the BBC today, for First Time Buyers who are comparing monthly mortgage payments to ever increasing rents, the comparison is not out of kilter so their demand to buy this year will remain strong as rates stabilise and ease.

Mortgage Products

There has been a further plethora of changes from lenders and product rates are continuing to tick down. Well done to Virgin Money for what looks like the first fixed rate, their ten-year fix, to be priced under 4% at 3.99%. Santander have come close with their 5-year fixed at 4.19% and it won’t be long until we see a few more products once again starting with a 3.

What is most pleasing is the amount of choice that has once again returned to the market after the heady days of the disastrous mini-budget.

Whether borrowers have a large or smaller deposit, whether they are employed, self-employed or a contractor, or whatever else they have that is not quite the norm, lenders are available to assist once more.

19th January – Asking Prices Up – Does it tell us anything?

Like many others, it was surprising on a couple of levels to read a report from Rightmove that house prices rebounded in January. Firstly, because we must reiterate that this is not house prices but “asking prices”, which is a huge difference, and secondly because we are barely only midway through January! Talk about desperation to get some good news out.

The question, therefore, is does this mean anything sensible? More importantly, is this an accurate guide to future trends? The answer to the latter is probably a resounding no, but there are some interesting nuances on both these questions.

The first is that this data shows an immediate snapshot in time, that the market has started brighter than many expected. There is usually a bounce in activity at this time of year as many potential buyers actually have time to think over the Christmas break and vow to have moved by next Christmas or, sadly, vow to not have to spend another Christmas together.

The real test will be whether this initial bounce of activity is sustained and translates into actual sales.

What we can optimistically gage from this, however, is that demand for property is still alive and well, and that higher interest rates are no longer putting off people from looking. I expect this will continue and the market, though undoubtedly slower than last year, will continue to confound doom-mongers yet again predicting any kind of crash.

All we will see, and any changes will be regionalised, is a more likely relatively soft correction as the pandemic froth exacerbated by the stamp duty holiday comes off. Much of this has already happened as far as asking prices are concerned, perhaps why we saw a little bump up in the last set of statistics, so I suspect on average we may well see leveling off over the year with an overall fall of 5%.

Once you factor in expected falls in energy costs, inflation, and mortgage rates, the second half of the year looks rosier with a fair share of cautious optimism as stability returns to the housing market. In fact, 2023 looks like it could well be the year to buy as slightly lower prices and more realistic interest rates mean that those who do manage to buy this year will look back in a few years’ time with a smug grin.

Return of the Tracker Mortgage

The world has changed dramatically over the past couple of months as fixed rates are no longer the foregone conclusion they have been for many borrowers over the past decade.

We have been through a short period of sharp interest rate increase and with Bank Base likely to peak after the next interest rate decision in February, we now find ourselves waiting with bated breath for lenders to move to cut their rates once more.

We have seen a plethora of changes already, but there will undoubtedly be more to come as lenders are starting 2023 with less of a pipeline of new business than usual and similar target levels for the year.

More borrowers are now starting to look at the prospect of tracker rate mortgages, which are variable rate deals which simply track the changes in the Bank of England Base Rate at a certain percentage above it. The reason for this is that not only are many of these on offer below equivalent fixed rates, but because many come with no early repayment charges and therefore there is an ability to switch onto a fixed rate once more when deemed appropriate.

That said, tracker rates do contain an element of risk, and for those who would sleep better at night knowing that their monthly payments will not suddenly change if something else unexpected happens, fixed rates are still sensible advice for many.

Taking professional advice is therefore key. There are a myriad of products, lenders and options out there that a borrower’s own bank may not have available. Whether this is an offset product, a 7-year fixed, a part repayment / part interest only loan, or an option available from a lender you would never have thought of approaching that will give a higher borrowing capacity, the right product to enable buyers to buy the home they want now, at a rate they can afford, is out there.

Have a great week!

Best Mortgage Rates

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 4.37% (6.50% APRC) and 5-year fixes from 4.34%, (5.90% APRC), whilst variable discounted rates are around from 3.14%, (3.20% APRC).

Those looking at Buy-To-Let can now obtain products from 3.74%, (6.80% APRC) for a 2-year tracker or 5-year fixes are available from 4.63% (5.90% APRC).

10th January – Mortgage Price War?

There is already talk amongst journalists that the coming weeks could see the return of a mortgage “Price War”. Of course, we all love a good price war, but times are a little bit different now.

So much depends upon the next moves by the Bank of England and it is interesting to see that SWAP rates have actually increased a little in the recent week or so, but I do think that we are very near the top. We may see another increase to 3.75% or even 4% in February, though I personally do not see the need, and that should be the top of this particular cycle.

What we do know is that lenders need to lend and as they emerge from their end-of-year hibernation we will see more activity in the form of decreasing rates.

Due to the disastrous end to 2022, lenders may find that their pipelines are lower than they would normally like them to be, and whilst a rate war these days may seem different from those of the past, competition will continue to see better products over the coming weeks as lenders jostle for market share.

Affordability, not the rate

In this market, tracker rates are the new black this season, but as 5-year fixes start to edge down below 4.5% many prospective buyers will find that the monthly payments at this level are indeed affordable, especially compared to rising rental costs.

And this is the key point. Whether or not rates start with a 4 or a 3 or anything else for that matter is not the point, the main point is affordability and the monthly payments. Are they affordable and do they get you the property you want at the time you want it?

The market can move in any direction, and trying to second-guess what happens next is tricky at the best of times.

Behavioral economics and the concept of anchoring is really interesting here, and people generally adapt very quickly. Most now accept they will not see rates at 1% or 2%, and are grateful that they will not see rates of 6% or 7%, so this new middle ground starts to feel very reasonable pretty quickly.

As I have mentioned before, and as evidenced by the pleasing levels o activity we have seen since the start of the year, demand is still there. People will need to or want to move and now rates seem to be stabilising lower than expected and prices have softened, 2023 could be a surprising year and the best year to buy for a while.

Have a great week!

Best Mortgage Rates

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 4.37% (6.50% APRC) and 5-year fixes from 4.35%, (5.90% APRC), whilst variable discounted rates are around from 3.29%, (4.91% APRC).

Those looking at Buy-To-Let can now obtain products from 3.74%, (6.80% APRC) for a 2-year tracker or 5-year fixes are available from 4.69% (6.50% APRC).

5th January – Happy New Year

As the last shadows of 2022 sullenly skulk away and we turn to cautiously embrace the New Year, hoping that ’23 does not have its own range of unwelcome surprises languishing in the shadows for us, we are faced with the usual barrage of predictions.

Making predictions these days is a combination of over-analysis, guesswork and crystal-ball gazing, a buffoonery only attempted by the very brave, the very stupid, or those with a particular reason for doing so. This year as an example I have seen house prices predicted to fall by over 10% on one side, to a rise of 5% to 8% on the other.

I will of course be making my own predictions in a separate post however!

What we do know is that mortgage rates themselves will fall in the first quarter of the year as lenders get competitive again and will stabilise so most people can borrow at between 3.5% to 4.5%, which is affordable for many. Three lenders announced big reductions today and 5-year fixes at 4.5% look decent once more.

The message is clear: we can only control our own choices and decisions at any one time, we can’t control everything.

What I do think however is that 2023 will very much be seen as a good year to buy, with prices easing a touch before rising again in the next few years. My mantra has always been that the best time for anyone to buy is when it suits them to, and it is affordable to do so. Holding off on the idea that it may be cheaper to next month or year rarely pans out, and often a chance is missed.

In fact, the discussion should not be about what the rate is at all, but is it affordable and get you the property you want now? We should stop trying to play the market.

Cladding

You may have missed this but finally, there is some good news on the thorny issue of cladding!

From 9th January 2023, six of the top lenders in the UK have agreed to consider mortgage applications on properties with potentially problematic external cladding.

We are awaiting some full details from some of these for Monday, but lenders will need evidence that buildings will be self-remediated by developers or covered by a recognised UK Government scheme or by leaseholder protections contained in the Building Safety Act, as evidenced by a Leaseholder Deed of Certificate.

The recognised remediation schemes in England are:

• The Developer Remediation Contracts (11 metres+)
• The Medium Rise Scheme (11-18 metres)
• The Building Safety Fund (18 metres+)

As always, each lender will approach this differently and reserve the right to consider each case on its own merits and could ask for more information, so not an absolute given, but it is expected that many leaseholders who could not sell or remortgage will now be able to do so.

The lenders so far committed are:

• Barclays Bank
• HSBC
• Lloyds Banking Group
• Nationwide Building Society
• NatWest
• Santander

We will of course continue to keep you posted as things develop.

Have a great week!

Best Mortgage Rates

In terms of mortgage rates, for standard residential mortgages, borrowers can obtain 2-year fixes at 4.37% (6.50% APRC) and 5-year fixes from 4.35%, (5.90% APRC), whilst variable discounted rates are around from 3.28%, (6.30% APRC).

Those looking at Buy-To-Let can now obtain products from 3.74%, (6.80% APRC) for a 2-year tracker or 5-year fixes are available from 4.69% (6.50% APRC).