NEWS: Are mortgage rates going down?

While interest rates have been rising quickly over the past year, we've actually seen mortgage rates going down in 2023.

As a result of rising inflation, the Bank of England has increased the base rate to 4%, leaving many wondering what the state of play is for mortgage rates over the next six months to a year.

As recently as December 2021, interest rates were at their record low of just 0.1%, meaning that the bank rate is now 40x higher than it was just over a year ago.

So, what does it mean for your mortgage?

In this post, we provide expert insight into what caused interest rates to rise last year, what mortgage rates will do next, and how a decrease in mortgage rates could affect your repayments.

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What caused interest rates to rise last year?

How is the mortgage market affected by interest rates?
-     What do the experts say?

What mortgage types are most affected by interest rate changes?

Are mortgage rates going down now?

What do lower mortgage rates mean for first time buyers?

How can you find an affordable mortgage in 2023?

What caused interest rates to rise last year?

The Bank of England's monetary policy changes – steadily raising the base rate - is a measure to combat inflation.

Making borrowing more expensive stabilises inflation and slows the economy; with more people saving and spending less, price rises begin to slow.

However, 2022 saw the energy crisis continue and geo-political situations worsening – the ongoing war in Ukraine – which has further impacted the Bank of England's changes to interest rates.

All these factors added up to send interest rates through the roof.

The graph below helps to visualise the relationship between inflation in the UK and the BoE's base interest rate:

As you can see, the recent base rate surge has largely been a reaction to soaring inflation. 

But while inflation was closer to 10% at the end of 2022, it was just 8.8% in January 2023 - so, perhaps we've seen it reach its peak?

Case Study - Read our case study below of how we helped our client save thousands of pounds on their mortgage deal. 

How is the mortgage market affected by interest rates?

Here are 3 tables comparing some of the best mortgage rates available on the market from the past year. 

You can see how the mortgage market has changed over the year, and where the rates sit currently: 

What do the experts say?

George Abouzolof
Senior Finance Broker CeMAP MSc BA Hons

Carly-Marie Cheeseman 
Head of International CeMAP CeRER

We have a news piece on the latest rate changes in the indusrty - it closely follows the mortgage market and is updated when there are significant lender announcements.

When interest rates rise, it becomes more expensive for consumers to borrow money. Naturally, this includes mortgages. Higher interest rates have affected the housing market in a number of ways:

Lower demand - Higher interest rates can make mortgages less affordable for first time buyers, leading to lower demand for homes.

Reduced affordability – Rising rates also affect second property buyers and BTL investors. Their mortgage payments could go up, meaning they may need to raise rent to compensate. Or, their projected rent won't meet the affordability for a mortgage on a new investment property, so they don't buy, reducing demand.

What mortgage types are most affected by interest rate changes?

If you have a mortgage with a variable interest rate – a rate that closely follows the Bank of England's base rate - you will have seen your mortgage costs go up throughout 2022.

However, if you're on a fixed rate mortgage you might have yet to see changes, depending on the length of your term. But you could still be stung when your deal ends, and you do remortgage.

However, monthly increases in mortgage payments would have been more acute if your fixed rate mortgage ended and you automatically switched to your provider's SVR (standard variable rate) – these are typically the most expensive interest rates to pay.

If you're looking to remortgage in 2023, we recommend comparing fixed and tracker mortgages to see which may be more suitable to you and offer the best available deal.

And if you're currently on a very low rate and want to raise additional finance without remortgaging, a second charge mortgage could help you protect your current deal.

Related: What is a Green Mortgage, and how do they work?

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Are mortgage rates going down now?

With political factors aiding stability – regarding mortgage rates – we are seeing reductions from lenders across the UK and an increase in affordable mortgage products on the market.

Many experts believe there will be at least one more base rate rise this year to 4.25% or 4.5% (although some disagree). But even another small rate rise may not significantly affect mortgage rates in the longer term, especially long-term fixed products for 5 or even 10 years. 

Rishi Sunak's appointment as Prime Minister has helped stabilise the economy and given mortgage lenders more confidence in offering lower rates to customers.

And this has been compounded by a 4-month housing price slump leading into 2023, causing lenders to get more competitive over the smaller mortgage demand – lowering results to attract business.

So, those looking to refinance in 2023 may now find a better deal in the current market due to mortgage rates easing.

However, despite positivity, remortgaging could still be more expensive if you're coming off the back of a previous fixed rate loan, depending on the term – especially if you've had a 5-year contract or longer.

With this in mind, it's best to shop around for a competitive rate and, perhaps most importantly, to seek the help of an experienced mortgage broker who can help you understand your position and give you access to the best possible deals available in 2023.

Related: How bridging loans can help you plug a funding gap and secure your property.

Need a refresher on how much you can borrow? Use our mortgage calculator below:

How much can I borrow?

Borrower 1 Income: Borrower 2 Income:

What are the current mortgage rates?

Here's a table of current mortgage rates that we've recently secured for clients: 

This week, Nationwide removed their sub 4% fixed rate deals from the market. 

And Virgin Money and Clydesdale Bank increased their variable revert rates (SVRs) to near 8%.

What do lower mortgage rates mean for first time buyers?

With a potential decline in mortgage rates forecasted, it may be tempting to postpone plans until the lowest rates arrive – this may be true not just for first time buyers, but also those remortgaging.

However, a compromise could be securing a variable rate mortgage, so if rates do go down, you're not missing out.

One piece of positive news for first time buyers is the specialised mortgage products still available – deals tailored to first time buyers specifically - and lower house prices in affordable areas.

The best strategy is to consolidate your finances, understand your borrowing power, and seek a mortgage broker's help to find a deal that best product for you.

Case Study - Read our case study below on how we helped our client borrow 5.5 times their self employed income.

How can you find an affordable mortgage in 2023?

With the uncertainty of interest rates looming (the base rate could very well keep climbing in the first quarter of 2023) and despite current positivity on declining mortgage rates, it can be daunting and confusing to figure out the best option.

We can help you compare mortgage products and their cost to find the best deal based on your specific situation from a wide range of lenders nationwide.

Related: What is a professional mortgage and can you get one?

Expert mortgage advisors have their finger on the pulse of the latest mortgage market news. Whether you're a first-time buyer or looking to refinance or invest in a BTL, we can help you understand your mortgage options so you feel confident you're making the right choice.

Call us at Clifton Private Finance to find out what we can do for you:

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