As we move through Spring 2023, there have been positive developments to counter the sizeable increases in mortgage interest rates since the latter part of 2022.
Following the turmoil surrounding last September’s mini-budget, a sense of calm has returned to the financial markets. Well, sort of, as there are now issues affecting international banks, such as Credit Suisse, which may impact the wider marketplace.
That said, this year’s Budget highlighted the improvements since last Autumn. In its
report, the Office for Budget Responsibility (OBR) set out that inflation – which peaked at 11.1% last October – should reduce to 2.9% by the end of 2023.
However, the most recent inflation figure had unexpectedly risen to 10.4%, resulting in the latest Base Rate rise.
(Source: Office for National Statistics, CPI, March 2023)
Mortgage market in 2023
There is some optimism though, as mortgage deal rates have been dropping recently.
This has been partly driven by the poorer economic climate, which means that total mortgage lending in 2023 is expected to be around 15% lower than in 2022.
(Source: UK Finance, December 2022)
This cooling of the housing market has triggered more enthusiasm amongst some lenders to fight for market share.
The average rate for a 2-year fixed deal sits at around 5.32%, and slightly less for a
5-year fix, at 5%. And, for those that tick all the boxes (which generally means borrowing 60% or less of the property’s value), then the better rates had been coming in at under 4%, although 4%-4.5% is probably a fairer representation.
(Source: Moneyfacts, average rates comparison to March 2023)
This is a better situation than what was on offer at the back end of 2022, but it will still be a concern for those coming to the end of their fixed rate deals this year.
Your next step…
Irrespective of whether you’re on a Fixed, Tracker or Standard Variable Rate (SVR),
do talk to us if you want to (or have to) reconsider your mortgage borrowing needs.
We’d help make sense of the multitude of options on offer. And you can take comfort from the fact that we operate in this sector day-in day-out (and currently many evenings), and have the expertise to deliver suitable advice. Plus, we can liaise with the various parties (estate agents, solicitors, surveyors, etc) to help make this process as smooth as possible for you.
That’s why it’s vital that you take advice in this ever-changing marketplace. In fact, the majority of you have done just that, as advisers accounted for around 84% of all mortgage distribution in 2022.
(Source: IMLA, December 2022 release)
For the first time since June 2020, we’ve seen an annual decline in UK house prices of 1.1% in February 2023. The general view is that there will be further falls as we move through 2023.
What is clear though, for homeowners, is that the price rises over the last few years, may help to offset any fall. For example, in the last two years alone, the average property price has risen by over £35,000 – a 15.4% increase in value.
Also, prices over the long-term have been incredibly resilient, and in the last 30 years, for instance, we have seen the average property price rise from around £50,000
in Q4 1992, to about £265,000 in Q4 2022. That’s more than a fivefold increase.
(Source: Nationwide, House Price Index, Feb. 2023 & Q4 2022)
Stamp Duty decrease
For those looking to purchase a home (in England & N. Ireland) you’ll still continue to benefit from the reduced stamp duty thresholds. This runs until 31 March 2025.
As said, high inflation (which sits at 10.4%) has been a contributory factor in the Bank of England Base Rate rises, which currently stands at 4.25%.
Although, the Base Rate is not the only determinant that influences mortgage interest rates,* but it can have a knock-on effect.
(Sources: Office for National Statistics, CPI, March 2023; Bank of England, Monetary Policy Committee, 23 March 2023 release). * Swap Rates influence Fixed Rate mortgages.
With so much to consider, it can all be quite confusing, and that’s why you should talk to us.
You may have to pay an early repayment charge to your existing lender if you remortgage.
Your home may be repossessed if you do not keep up repayments on your mortgage.