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January Mortgage Market Update

Last year was a pretty turbulent year for the mortgage market. We closed the year with an interest rate rise in December – the ninth in 2022. In our January mortgage market update, Adam Nanson from Your Mortgage Expert looks at what might happen next with mortgages in 2023.

“Whether you’re looking to buy or have an existing mortgage, no doubt you’ll be watching the mortgage rates with interest over the past year. There are lots of you whose fixed term mortgages will be up for renewal in 2023. Especially those of you who purchased during the stamp duty holiday in 2021.

“All of which means, we understand that mortgage rates will be a concern for our clients this year. We hope we can help alleviate these concerns and we are always around to talk.”

What is likely to happen with interest rates in 2023?

 “We start the year with an interest rate of 3.5%. And, despite this being the highest rate for nine years, the Bank of England has warned us that more increases are due in 2023.

“Whilst mortgage rates did spike in 2022, we ended the year in a much more stable position with most lenders actually dropping rates. This is because, even though interest rates are due to go up on 2023, they are now predicting the increase won’t be as high as they originally thought*.

“It was originally predicted that the interest rates would peak at 6% in 2023. But the general thoughts from the latest Bank of England comments is that it will be more likely to be below 4.5%*.”

What does this mean for mortgage rates?

 “Most experts predict that the days of extremely low mortgage rates are probably over. And, if you are looking to buy or remortgage this year, you will almost certainly pay more than you would have a year ago. Essentially, we may have to get used to the “new normal” of slightly higher interest rates.

“Having said this, interest rate rises are likely to be lower in 2023 than was previously thought. So, most mortgage lenders are now pricing their fixed term mortgages slight lower accordingly.

“We have seen the cost of fixed term mortgages edging down over the last month or so. And, we would expect that trend to continue during the first quarter of the year.”

What does this mean if I need to remortgage in 2023?

 “If your mortgage is up for renewal this year, the main thing we would advise is to act rather than be passive. If you fall onto your lender’s standard variable rate, it will almost certainly be more expensive than signing up to a new deal.

“Fixed term deals are coming down at the moment. And, many of our clients are still opting for a fixed mortgage because they appreciate the certainty of knowing how much their monthly bills are likely to be. This is especially relevant at the moment with rising fuel costs and increasing grocery bills.

Tracker mortgages are proving popular right now was well. In many cases, at the moment, tracker mortgages have lower rates than fixed rate mortgages. This is because lenders are being very careful with fixed rate deals right now.

“It is worth remembering though that, with tracker mortgages, the rate you pay can go up and down. So, if the Bank of England base rate increases, so will the amount you pay each month. However, if the base rate does peak and then starts to fall, a tracker will allow you to take advantage of falling rates.

“Ultimately, it depends on your appetite to risk and what you can afford to absorb in your monthly budget. We would advise you speak to a mortgage adviser like us to fully review your circumstances and decide what is suitable.”

If you have any questions after reading the January mortgage update, please get in touch. We don’t charge anything up front, so by speaking to us, you are under no obligation. We are based in Salisbury, Wiltshire, but we can help you no matter where you live in the UK.

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