What next for residential mortgage rates in 2023?

Following the mini budget in September 2022, the headlines about mortgages and the housing market made for some pretty scary reading, especially the ones on mortgage rates reaching 6%.

However, despite the latest interest rate increase in May meaning the base rate now stands at 4.5%, mortgage rates have actually come down since last Sept – which is great news for anyone remortgaging or buying. Moneyfacts shows average five-year fixed rates for a remortgage at 60% loan to value at 4.66% and at 90% loan to value at 5.13%.

Is it still worth going for a fixed rate mortgage?

If your current mortgage deal is coming to an end, you’re thinking of moving home or you’re looking to get your foot on the property ladder for the first time, it’s worth starting to investigate now what mortgage rates will apply, three to six months ahead of when you will actually need a mortgage.

The mortgages and rates you can secure are very personal to you, depending on your financial circumstances and even the type of property you want to buy. And no matter what you hear or read, while a fixed rate might be suitable for one person at a particular time, it may not be appropriate for another. So, rather than relying on what’s reported in the news, which will typically be broad averages, it’s worth knowing what mortgage finance you, personally, will be able to secure in this ‘new world’ and at what rate.

What are the mortgage rate forecasts for this year?

The good news is that lenders have money to lend and so, although the initial mini budget ‘shock’ led to higher rates, lenders are now more confident of the future and are pricing mortgages much more competitively.

Whether rates will rise or fall in the future is always hard to forecast – and it’s especially tricky in the current climate, when we’re still recovering from the impact of the pandemic, the war in Ukraine and the huge double-digit inflation rates.

The best news that could come next is inflation starting to ease. If that happens, there is an expectation that the base rate will come down again and this will hopefully cause mortgage rates to fall.  

Currently Capital Economics is forecasting that if inflation does reduce, the base rate could drop to 3% by the end of 2024. As such, the outlook is that although mortgage rates may rise in 2023, they will fall back in a few years’ time.

What should you do if buying or remortgaging in 2023?

The key to securing a mortgage that’s affordable for you now and into the future, is to speak to a mortgage broker to understand what’s available for your individual financial circumstances.

There are literally thousands of mortgage products, and these tend to be reviewed by lenders on a quarterly basis, so they can change several times a year. The right mortgage for you will depend on many things, including whether you’re employed or self-employed, have overtime or bonuses, earn money from dividends - even whether you have a pension. It will also depend on the debt you already have and the type of property you own or are buying.

Talk to a broker sooner rather than later

There are so many variables that if you want to buy or need to remortgage this year, we think it’s well worth talking to a mortgage broker sooner rather than later, allowing at least six months to go through the remortgage process.

Whatever your worries and fears about mortgages this year, we are confident that we can help you find a way to move forward with financing your existing home or new purchase.

Get in touch via our sister company Mortgage Scout's website and they will be delighted to help you. Do remember too, that you only pay for advice if you take out a mortgage with them – the work they do to recommend a mortgage for you is free of charge.

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.
There may be a fee for mortgage advice. The actual amount you pay will depend upon your circumstances. The fee is up to 1%, but a typical fee is 0.3% of the amount borrowed.
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