How the 2023 mortgage “price war” could benefit both homebuyers and homeowners

If you have been keeping an eye on mortgage rates since the end of 2022, you will know that there were some headline-worthy market shifts in recent months.

Following Kwasi Kwarteng’s controversial mini-Budget in September 2022, which saw him cut taxes and Stamp Duty, UK mortgage rates reached record highs.

According to a Guardian report, approvals dipped by 10% in October 2022 following the former chancellor’s announcements. And, most notably, the cost of fixed rates passed 6% for the first time since 2008.

As 2023 began, however, the tide began to turn. As lenders vie to offer competitive deals, many fixed rates are beginning to decrease after spiking last year.

Read on to find out everything you need to know about the “mortgage price war” happening in the markets, and how you might be affected as a homebuyer or homeowner.

Despite the Bank of England raising the base rate, fixed mortgage rates are beginning to fall

It’s safe to say that since the beginning of the pandemic, mortgage borrowing has become more expensive.

When the pandemic hit in March 2020, the Bank of England (BoE) reduced the base rate to a record low of 0.1% to encourage borrowing. The base rate remained at this level until December 2021, after which the BoE has raised it 10 times to its current rate of 4.25%.

Yet despite both the BoE’s gradual increasing of the base rate, and Kwarteng’s mini-Budget sending rates to more than 6% in October 2022, fixed mortgage rates are beginning to fall again.

There are many contributing factors here, but crucially, it seems lenders are engaged in what The Telegraph refers to as a “price war” which could benefit homebuyers this year.

Indeed, as homebuyers struggle to meet the heightened affordability criteria brought on by last year’s soaring interest rates, lenders are responding by reducing their rates, and may continue to do so throughout the year.

For instance, according to Moneyfacts, on 13 March 2023 the average Nationwide five-year fixed mortgage rate sat at 4.24% – down from 4.89% in January, Unbiased reports. With other lenders following suit, homebuyers might experience some respite from the record high rates experienced in 2022.

A mortgage “price war” could benefit homebuyers and homeowners in 2023

If you are thinking of applying for a mortgage this year, the widespread reduction of rates so far in 2023 could significantly benefit you.

Of course, nobody can ever truly predict what might happen in the mortgage market – but if these decreases continue, you could see rates dip to 4%, or even lower, by the end of the year.

Similarly, if your existing fixed term is coming to an end, you could remortgage on a more affordable rate than if you had done so in 2022.

Importantly, the story is a little different for tracker- and variable-rate mortgages.

A tracker-rate mortgage shifts in line with the base rate, so will continue to increase if the base rate does the same. Variable rates can be changed at your lender’s discretion, so it could be wise to speak with a broker if you are looking for a variable-rate mortgage this year.

Overall, though, the future may be looking brighter for homebuyers and those looking to remortgage. Working with a broker can help connect you with lenders who can offer competitive rates, potentially enabling you to secure an affordable mortgage for your dream home this year.

Get in touch

If you are looking to take out a mortgage or remortgage your existing home this year, working with an expert can help you access the right deal for you. Email 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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