What will happen to mortgage rates in 2023? Read an expert’s take

If you have been searching for a mortgage deal for a few months, you will know that the market took a somewhat unfavourable turn in the final months of 2022.

Indeed, many lenders had been raising rates steadily over the course of the year, in line with the Bank of England’s (BoE) continuous increasing of the base rate, which now stands at 3.5%.

Then, in September, the former chancellor’s bold mini-Budget proved a further hinderance to the mortgage market. The Guardian reports more than 40% of the market “disappeared almost overnight” as lenders began withdrawing deals. Plus, two-year fixed-rate deals surpassed 6% for the first time since 2008, Bloomberg reports.

As we begin 2023, you could be wondering: “what will happen to mortgage rates this year?”

Read on to find out expert predictions for the mortgage market in 2023.

Experts predict mortgage rates could steadily decline from the highs they reached in 2022

Since reaching their peak in October 2022, many lenders have eased their rates – although these may still seem high when compared with the historic lows introduced during the Covid-19 pandemic.

Moneyfacts data reveals that, as of 13 January 2023, the lowest two-year fixed-rate mortgage deal on the market for someone moving home stands at 4.65%. For first-time buyers, the lowest rate available is 4.82%.

In light of the deflation of rates since October, many experts predict they will continue to slowly decline over the course of 2023. If the BoE continues to raise the base rate by multiple percentage points, rates could rise again – but if the base rates peaks at its current level, lenders may maintain the mortgage deals currently on offer, or even offer cheaper products.

It is important to note that, according to FTAdviser, the recent interest rate rises have caused mortgage approvals to drop to their lowest level since before the 2020 lockdowns. So, lenders could begin reducing their rates to tempt borrowers back into the market.

However, there is no crystal ball when it comes to mortgages. Trying to time the market can lead to disappointment – so working with a mortgage expert as you search for a new home could be the most constructive move.

House prices are predicted to fall in 2023, meaning you may need to borrow less

Of course, when looking for a new mortgage, the price of the home you wish to buy is a huge contributing factor.

A survey of economists conducted by the Times predicts that house prices could experience “double digit declines” in the coming months. Indeed, while house prices are still rising year-on-year, since October 2022 the average month-on-month price has begun to decline. In December 2022, Halifax posted the steepest house price decline in 14 years, the Guardian reports.

You can read our full insights on how house prices could perform in 2023 on our blog page.

The bottom line is: if your dream home decreases in value, you may need to borrow less. So, although mortgage rates are unlikely to return to the lows they reached during the pandemic, you could still find an affordable deal this year.

Get in touch

Working with a mortgage expert can put your mind at ease in turbulent times. For a discussion about finding an affordable mortgage, selling your current home, or any other property matter, email enquiry@edinburghmortgageadvice.co.uk or call 0131 339 2281 to speak to us.

Please note

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it. Buy-to-let (pure) and commercial mortgages are not regulated by the FCA. Think carefully before securing other debts against your home.

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