What’s down the road for 2023’s mortgages

Adrian Anderson - Anderson Harris

Home » What’s down the road for 2023’s mortgages

Published: 11th January 2023

This Article was Written by: Adrian Anderson

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With a new year underway, the Anderson Harris team share their predictions for the months ahead and explain why being proactive could pay off for homeowners and first-time buyers.

Following the economic turbulence at the end of 2022, specialists in the property finance sector are now cautiously optimistic about 2023. Many expect the fixed mortgage rate picture to improve for consumers.

Despite the recent Bank of England base rate rises, we have seen mortgage fixed rates reduce for circa 10 weeks in a row. This is because the markets are less volatile now than they were following the various Chancellors’ statements in the Autumn.

Fixed rate money is essentially an expression of where the market feels the future base rate will be, hence why we are seeing fixed rates come down in the face of a rising base rate. This view is borne out in the pricing, as a 2-year fixed rate is more expensive than a 5-year fixed rate.

A potential price war among lenders

One of the reasons why we have seen lenders reduce fixed rates and reduce margins for variable tracker rates is that major lenders are facing a period where mortgage transactions are likely to be 20% down.

Initial indicators suggest the property market will slow down in 2023. With the Halifax recently reporting another fall in the average UK house price for the fourth month in a row, the slow down prediction looks very likely. Q3 of 2022 also saw record numbers of property transactions fall through.

Faced with this challenging and smaller market for transactions, there’s a strong possibility of a price war among mortgage lenders. This could lead to mortgages being priced at whatever rate lenders feel will protect their 2023 share of a diminishing market.

Implications for homeowners and first-time buyers

Selecting the right mortgage product therefore becomes even more critical as the market pivots again. We are certainly answering many questions from homeowners and first-time buyers who are confused and concerned about current products given changing interest rates.

Common questions centre around whether fixed rate products are better or should they reconsider tracker mortgages? These are good questions as few homeowners and buyers are aware that fixed rates have been reducing while The Bank of England base rate has been increasing.

Fixed rate products and tracker rates have reached near parity in some scenarios and should certainly reach parity next month when we expect the Bank of England base rate to increase again on the 2 February.

For those who had rates secured with their existing lender, there is also concern about having made the wrong decision at the time – particularly if they didn’t shop around.

Of course, independent mortgage brokers can be more objective and have greater freedom to find good deals. At Anderson Harris we factor in the unique circumstances of our clients to source and recommend products which align with that person’s current and future aspirations.

How to keep an eye on the changing market

A key takeaway then for the coming months is to check in regularly with a mortgage adviser. Homeowners and first-time buyers looking to get a good mortgage deal need to be nimble, quick and responsive to latest changes in the market. This tends to be harder to achieve when going straight to the major lenders or a non-proactive adviser.

Where possible get independent advice or a second opinion. Extracting yourself early from a product with a fixed term can prove costly and bring penalty fees. You therefore want to be sure you’ve secured the right property finance for the current time and longer term too.

Can we help?

Talking to an independent mortgage specialist can help you take the informed decisions you need. Contact our team of specialists on tel 020 7495 6633 or email enquiries@andersonharris.co.uk.

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