Mortgage rates expected to fall in 2023

In good news for both buyers and homeowners wishing to remortgage, mortgage rates look set to fall towards the end of this year (referring to late 2022) and into 2023. As expert local estate agents with offices in Enfield and around North London, here’s our breakdown on how the mortgage rate forecast might affect you and your property.

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Key Takeaways

• The money markets are already adjusting to the changing political outlook, where stability for the UK's finances is essential.
• Mortgage rates are expected to fall to 4-5% next year (referring to 2023) and this is likely to be the new norm. The days of ultra cheap money are now behind us.
• A return to 5% mortgages will bring some stability to the housing market and is likely to reduce the need for sellers to drop their asking prices to achieve a sale.

Events are moving fast in the worlds of politics and the financial markets.

Already, the money markets are adjusting to a changing political outlook, where stability in the UK’s public finances is an imperative.

The big unknown that remains is how much further central banks will need to raise interest rates to bring inflation back under control. A recent speech from the Bank of England suggested markets were over-estimating how much higher interest rates will rise. However, only time will tell.

What is clear, is that mortgage rates are not going to return to the ultra-low levels of recent years and home buyers need to adjust to the fact that 4-5% rates are set to become the norm in future.

The spike in mortgage rates makes housing less affordable

Tighter lending criteria inevitably impacts the buying power of new borrowers.

Lenders will now be testing affordability at up to 8% mortgage rates, squeezing that buying power even further.

Will mortgage rates keep rising in 2023?

The outlook for transactions and pricing in 2023 will all depend on what happens with the economy and with mortgage rates.

As buyers are affected by higher borrowing rates, so in turn are sellers, since reduced buying power will impact the asking prices sellers are able to achieve when marketing their homes.

The most important part of this equation is how long mortgage rates for new buyers stay at over 6%, and how quickly they might fall back to a more manageable 5%, a level we see as a tipping point for house price reductions.

Should mortgage rates fall back quickly in the next quarter (from time of writing, likely late 2022), the outlook for next year (2023) will be very different, compared with the prospect of mortgage rates remaining at or above 6% for the next 12 months.

A return to 5% will bring some stability to the housing market and is likely to reduce the need for sellers to drop their asking prices to achieve a sale.

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Source: Zoopla