Could Mortgage Rates Fall Substantially In 2023?

by | Tuesday 24th Jan 2023 | Mortgage News

Mortgage rates fall heading into 2023

Mortgage rates fall heading into 2023 (Source: This is Money)

2023 is already shaping up to be a very interesting, and hopefully positive year for mortgages and the property market. Well, let’s face it, anything is better than the disaster of the end of 2022. We all know that mortgage rates increased significantly in September and October 2022 as the BoE raised their base rate. A mixture of overreaction and fear forced lenders to increase their rates to around 6%. However, new data recorded and communications from lenders this year all indicate that we could see mortgages rates fall significantly in 2023.

Mortgage Rates Fall Could Be Significant

Global wealth management company Quilter have released predictions this week that confirm that mortgage payments in the UK could fall by as much as 25% by the end of 2023 due to decreasing mortgage rates and market stability. Quilter, who offer clients advice and guidance on investments and general management of income and outgoings goes through a few facts and figures to illustrate how they have come to this conclusion. At the end of 2022, the average UK property was valued at around £295,000. Quite a large increase over the last 12 months. At the time, mortgage interest rates were also at around 5-6% on average.

Taking an average mortgage term of 25 years and assuming that the homeowner has put down a 20% deposit, someone who purchased at the end of 2022 would pay up to £1,521 per month on a repayment basis or £1,180 on an interest only basis. In comparison, the same purchase 6 months earlier could have secure a mortgage interest rate of 2% which would have been about £1,000 a month on a repayment basis or £393 on interest only!

However, things this year the tides have already turned as mortgage rates fall and so do average property values.

How Much Money Can Be Saved?

Forbes have predicted that house prices in the UK could fall by up to 5% in 2023 and some lenders predict a more extreme figure of 7 – 10%. Mortgage rates are also constantly decreasing at the moment and most experts predict that they will balance out at around 3 – 4%. That means that if the average price of a property fell by 5% to £280,000 and someone secured a mortgage rate of 3%, their payments could drop to £1,328 on a repayment basis or £700 on an interest only basis. A 13.5% difference or £2,300 worth of savings per year.

What Do The Mortgage Experts Think?

As professional mortgage advisors, we are very confident in the property and mortgage market in 2023. Why? Because everything points towards an upturn. Whether it’s inflation dropping and the economy stabilising, lenders dropping interest rates like they’re going out of fashion, or the increase in new mortgage enquiries and first-time buyer interest that we have already seen in the first three weeks of 2023. Everything seems to be recovering sooner than most of the professionals predicted, and we are extremely happy to see it. Don’t get us wrong, there is still a long way to go before this country recovers, but 2023 is looking like it’s going to be a great year for borrowers.

If you or anyone you know are looking for a mortgage in 2023, give our team of mortgage professionals a call today or drop us an email to see how we can help. We are a whole of market mortgage broker and can find you the best deal for your circumstances.

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If you have any questions about UK mortgage news or or anything you’ve read then please get in touch. We’d love to hear from you.

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