Introduction
What to expect from the UK mortgage market in 2023
Rising mortgage rates
Reduced affordability
Increased demand for fixed-rate mortgages
More lenders withdrawing products
A slowdown in house price growth
What to expect from the UK mortgage market beyond 2023
A gradual return to pre-pandemic normality
The rise of alternative lending options
More focus on sustainability
Tips for borrowers in a challenging mortgage market
Shop around for the best mortgage deal
Get your finances in order
Consider a longer mortgage term
Think about using a mortgage broker
Conclusion
Introduction
The UK mortgage market has been volatile in recent years, with the COVID-19 pandemic and the war in Ukraine having a significant impact. In 2023, the market is expected to remain challenging, with rising interest rates and inflation squeezing household budgets. However, there are also some positive signs, such as the increasing availability of alternative lending options and a greater focus on sustainability.
In this blog post, we will take a look at what borrowers can expect from the UK mortgage market in 2023 and beyond. We will also provide some tips for borrowers who are looking to get a mortgage in a challenging market.
What to expect from the UK mortgage market in 2023
Rising mortgage rates
One of the biggest challenges facing borrowers in 2023 is rising mortgage rates. The Bank of England has raised interest rates several times in recent months in an attempt to combat inflation. This has led to an increase in the cost of borrowing, including mortgages.
The average two-year fixed-rate mortgage rate is now over 5%, up from around 2% at the end of 2021. This is the highest level since 2011. Five-year fixed-rate mortgages are also more expensive, with average rates now above 6%.
Reduced affordability
Rising mortgage rates and inflation are making it harder for borrowers to afford a mortgage. The average first-time buyer deposit is now over £50,000, and the average mortgage repayment is over £1,000 per month.
Increased demand for fixed-rate mortgages
With mortgage rates rising, more borrowers are expected to opt for fixed-rate mortgages in 2023. Fixed-rate mortgages allow borrowers to lock in a certain interest rate for a set period of time, usually two, three, or five years. This can provide borrowers with peace of mind and financial stability, especially if they are concerned about rising rates.
More lenders withdrawing products
Lenders are also expected to withdraw more mortgage products from the market in 2023. This is because lenders are finding it more difficult to price mortgages in the current volatile market environment.
A slowdown in house price growth
The combination of rising mortgage rates and reduced affordability is expected to lead to a slowdown in house price growth in 2023. Some experts predict that house prices could fall by up to 10% in the next year.
What to expect from the UK mortgage market beyond 2023
A gradual return to pre-pandemic normality
In the long term, the UK mortgage market is expected to return to pre-pandemic normality. However, this is unlikely to happen until at least 2024.
The rise of alternative lending options
The rise of alternative lending options is another trend that is expected to continue in the coming years. Alternative lenders, such as peer-to-peer lenders and bridging lenders, can provide borrowers with access to mortgages that they may not be able to get from traditional banks and building societies.
More focus on sustainability
Lenders are also expected to focus more on sustainability in the coming years. This is because there is a growing demand from borrowers for mortgages that are linked to sustainable properties or energy-efficient home improvements.
Tips for borrowers in a challenging mortgage market
Shop around for the best mortgage deal
It is important to shop around for the best mortgage deal in any market, but it is especially important in a challenging market. There are a number of different mortgage lenders and brokers out there, so it is important to compare their rates and products before making a decision.
Get your finances in order
The better your finances are in order, the more likely you are to be approved for a mortgage and get a good interest rate. This means having a good credit history, a low debt-to-income ratio, and a decent savings deposit.
Consider a longer mortgage term
If you are struggling to afford your monthly mortgage repayments, you may want to consider taking out a longer mortgage term. This will spread your repayments over a longer period of time, making them more affordable. However, it is important to note that you will pay more interest in total over the life of the loan.
Think about using a mortgage broker
A mortgage broker can help you to find the best mortgage deal for your individual needs. They can also help you to understand the different mortgage products available and to complete the application process.
Conclusion
The UK mortgage market is expected to remain challenging in 2023 and beyond. However, there are still ways for borrowers to get a mortgage. By following the tips above, you can improve your chances of getting approved for a mortgage and getting a good interest rate.
Additional tips:
Be prepared to compromise. You may need to compromise on your ideal property or location in order to get a mortgage. For example, you may need to buy a smaller property or move to a less expensive area.
Be patient. It may take some time to find the right mortgage deal and to get your application approved. Don't be discouraged if you are not approved for the first mortgage you apply for.
If you are struggling to get a mortgage, there are a number of organizations that can offer support and advice. These include the Money Advice Service, the National Debtline, and Shelter.