Mortgage Rates UK News: Will They Go Down in 2023?
The average two-year fixed UK mortgage rate is 7%, the highest since the 2008 global financial crisis. Will 2023 mortgage rates drop?
Since December 2021, the Bank of England (BoE) has raised interest rates from 0.1% to 5% in June 2023. Mortgage lenders raised rates to curb inflation.
This extensive page discusses the current mortgage issue, including:
- Forecasts for mortgage rates in 2023
- Low mortgage rates in the past
- the potential to sign a long-term fixed-rate contract
- recognising those who can obtain the most affordable mortgage rates
- locating the best mortgage deal for first-time buyers
How Much Have UK Mortgage Rates Risen?
As of 1 August, Moneyfacts reported that the average rate for a two-year mortgage agreement was 6.85% and the five-year arrangement was 6.37%. Before the financial crisis, the average two-year fixed rate was 6.94%.
The following table from Moneyfacts displays the monthly change in mortgage rates:
| Date | Average 2-year fixed rate | Average 5-year fixed rate |
| 16/06/2023 | 5.98% | 5.62% |
| 19/06/2023 | 6.01% | 5.67% |
| 20/06/2023 | 6.07% | 5.67% |
| 21/06/2023 | 6.15% | 5.79% |
| 22/06/2023 | 6.19% | 5.82% |
| 23/06/2023 | 6.19% | 5.83% |
| 26/06/2023 | 6.23% | 5.86% |
| 27/06/2023 | 6.26% | 5.87% |
| 28/06/2023 | 6.30% | 5.91% |
| 29/06/2023 | 6.37% | 5.94% |
| 30/06/2023 | 6.39% | 5.96% |
| 03/07/2023 | 6.42% | 5.97% |
| 04/07/2023 | 6.47% | 6.01% |
| 05/07/2023 | 6.51% | 6.02% |
| 06/07/2023 | 6.52% | 6.02% |
| 07/07/2023 | 6.54% | 6.04% |
| 10/07/2023 | 6.63% | 6.13% |
| 11/07/2023 | 6.66% | 6.17% |
| 12/07/2023 | 6.7% | 6.2% |
| 13/07/2023 | 6.75% | 6.27% |
| 14/07/2023 | 6.78% | 6.30% |
| 17/07/2023 | 6.78% | 6.30% |
| 18/07/2023 | 6.78% | 6.30% |
| 19/07/2023 | 6.81% | 6.33% |
| 20/07/2023 | 6.79% | 6.31% |
| 21/07/2023 | 6.80% | 6.32% |
| 24/07/2023 | 6.81% | 6.32% |
| 25/07/2023 | 6.83% | 6.34% |
| 26/07/2023 | 6.86% | 6.36% |
| 27/07/2023 | 6.83% | 6.34% |
| 28/07/2023 | 6.81% | 6.34% |
| 31/07/2023 | 6.81% | 6.34% |
| 01/08/2023 | 6.85% | 6.37% |
Will UK Mortgage Rates Go Down in 2023?
Mortgage lenders have raised rates in anticipation of the Bank of England’s base rate hikes to combat inflation. This has raised two-year and five-year mortgage rates. The average SVR is 7.85%, rising.
The IMF expects these recent interest rate hikes to be transitory. Once inflation is under control, advanced economy central banks will likely loosen monetary policy and return real interest rates to pre-pandemic levels. If true, UK homeowners would benefit greatly.
Higher financing prices and the cost of living problem have reduced new house demand. The Bank of England reported 54,700 mortgage approvals in June, up from 51,100 in May. Net mortgage borrowing rose to £0.1 billion in June.
How Low Have Mortgage Rates Fallen?
Mortgage rates in the UK drastically decreased in 2021, partly as a result of the Bank of England’s historically low base rate of 0.1%, which was established during the COVID-19 pandemic from March 2020 to December 2021. Mortgages with rates around 1% were frequently available at this time to borrowers with substantial home equity.
The base rate has recently increased, though, which has an impact on mortgage rates. According to Moneyfacts, the average rate for a two-year fixed mortgage arrangement as of 1 August 2023 was 6.85%. This represents a substantial improvement over the paltry 2.34% in December 2021. Over the same period, the average five-year contract rate rose from 2.64% to 6.37%.
Deciding on a Long-term Fixed-rate Mortgage
With interest rates changing, you can select a long-term fixed-rate agreement. Given the high rates for five- and ten-year fixes, this mortgage deal’s merits and downsides should be carefully weighed. Borrowers may regret long-term deals if rates surge and decrease again.
Borrowers should get independent financial counsel, maybe from a mortgage broker, for this difficult issue. Mortgage comparison tools help first-time buyers, house movers, buy-to-let landlords, and remortgagers find the cheapest rates.
Who Can Secure a Cheap Mortgage?
Most low-rate options are for homeowners moving or remortgaging. These people are lower-risk borrowers with strong equity or enough money for a housing deposit.
You’ll need equity or a hefty housing deposit to get the best mortgage rates. Low-interest mortgages require a 40% deposit or equity. This suggests an LTV of 60%.
Factors to be considered for a cheap mortgage deal include:
- The larger your deposit, the lower the interest rate on your mortgage.
- Five-year mortgage deals tend to have lower rates than shorter-term deals.
- Some deals are only available to borrowers in England and Wales.
- A top-notch credit score is essential to secure a good deal.
The Cheapest Mortgages for First-time Buyers
First-time buyers usually put down 5%–10%. They pay higher interest rates because lenders view them as riskier than borrowers with greater deposits.
Deals may be restricted for those with little deposits. Late in 2022, 5% deposit mortgages fell.
Mortgage fees—including upfront and exit fees—should be considered together with interest rates. Avoid low headline rates with excessive surcharges. These fees might greatly impact your overall purchase cost.
Lenders have strict eligibility requirements, so you may not qualify for an advertised mortgage deal.
Understanding 100% Mortgages
Skipton Building Society launched a 100% mortgage for first-time buyers. This allows applicants to borrow 95%–100% of a property’s worth without a deposit.
Consulting with a Mortgage Broker
As they have access to a variety of offers available on the market, mortgage brokers may be a useful resource. Keep in mind, too, that some banks reserve exclusive offers for their loyal patrons and may not make them available to brokers. It could be beneficial to discuss this with your present bank or lender.
Finding the Best Mortgage Deals
Building equity in your home may qualify you for a lower-interest mortgage. Our mortgage comparison utility can assist you in locating the most affordable mortgage that meets your requirements. The application, created in collaboration with Koodoo Mortgage, makes it simple to compare mortgage offers, even without providing personal information.
If you need guidance, visit a mortgage broker. The tool can present possibilities.
It is difficult to predict with certainty whether UK mortgage rates will decrease in 2023. The situation depends on several macroeconomic factors and Bank of England policies. However, knowing your options and seeking professional counsel can help you capitalise on the current market conditions.
Here are some of the potential influences on mortgage rates that you can keep a watch on:
1. Bank of England’s Monetary Policy and Base Rate
The MPC at the Bank of England sets the base rate, sometimes known as the “Bank Rate,” which affects mortgage interest rates. Mortgage rates may rise as a result of a higher base rate making borrowing more expensive.
Mortgage interest rates, however, may not necessarily alter immediately in response to a change in the base rate. Banks have the option of bearing the expense or shifting it to their clients. In addition, they could opt to change their prices in response to market rivalry or other economic variables.
The base rate is reviewed and determined during the MPC’s eight annual meetings. You may get a sense of the potential direction that mortgage rates might go by observing any changes or signs of impending adjustments.
2. Inflation
Mortgage rates can be significantly impacted by inflation. Lenders may raise interest rates to make up for the loss of the pound’s buying power when inflation soars. Mortgage rates might rise if the Bank of England raises its base rate in response to high inflation in order to reduce borrowing and expenditure.
3. Economic Growth
The condition of the British economy can affect mortgage rates. If the economy is doing well, people may be able to afford mortgages, increasing demand and mortgage rates.
Rates may be cut during a recession to promote borrowing and expenditure to boost economic activity.
4. Housing Market Conditions
Additionally, the state of the property market might affect mortgage rates. Lenders may raise rates if the property market is thriving and there is a large demand for mortgages. In contrast, lenders may decrease rates during a downturn when fewer people are purchasing houses in order to entice new borrowers.