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Mortgage market - expectations for next year

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 21. December 2022

Looking to speak to mortgage brokers about what they expect from the mortgage market for next year and what they want to see. 

  1. Where do you expect rates to be next year?
  2. Where do you think the biggest areas of business will be? Will there be any areas of drop off?
  3. What do you want to see from lenders? 

11 responses from the Newspage community

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Riz Malik
Independent Financial Adviser at R3 Wealth
Hold on to your hats because next year is going to be interesting.

With further rate increases in the first half of the year, things are going to be tough. As house prices fall, transaction levels should start to increase in the second half of the year but it will very much be a buyer's market.

Lenders are going to have to either cut margins and compete on price or innovate if they plan to grow their loan book. Debt consolidation will be big business as people try to minimise their outgoings. Landlords looking to refinance are going to be hit the hardest as their options will be limited which will limit their ability to grow their portfolios.

Even though the market will be tough, there will be plenty of business for brokers who are able to use their experience and knowledge to guide their clients through 2023.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Rates will increase until Spring, the Bank of England will inflict serious and unnecessary pain on the economy while holding rates high whilst unemployment rises and the economy retracts solely on the basis that inflation will take a while to retreat. Andrew Bailey will be sacked by an equally incompetent Prime Minister.

The summer will see a revival in the housing and mortgage market. Retreating rates and rock bottom house prices will increase the buy to let market substantially. After initially seeing the disappearance of 95% and 90% LTV mortgages, we will see our first 100% loan to value loans since 2008.

Mergers and acquisitions in the banking and specialist lending sector will see an uptick and some of the smaller challengers will get snapped up as they see their margins squeezed. It'll be busy!
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Justin Moy
Managing Director at EHF Mortgages
Mortgage rates will eventually move to a range of 3-4%, with a skew towards lower loan-to-value (LTV) remortgage business in early 2023. Attracting quality lower risk mortgage lending will be a priority for most lenders. A significant % of mortgage business will be kept via Product Transfers, either due to rates and/or affordability rules, but the role of Mortgage Brokers within that rate swap is so important and we need to be instilling this with our clients. Ideally, mortgage lenders need to make it less attractive for clients to go direct and without advice. Engage with the mortgage broker who introduced you to that client in the first place, ensure the client is pointed positively in our direction, and do not make it easy for the client to get it wrong, without advice. We end up picking up the pieces..
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Craig Fish
Director at Lodestone Mortgages
The hope is we will see fixed rates settle between 3 & 4 %, but it would be nice to see lenders go further if possible. Lenders will likely be looking for low LTV, good-quality low-risk debt. The biggest area of business next year is going to be remortgage, debt consolidation and product transfers as many clients are going to be coming off 'never to be seen again' low-interest rates and need tailored advice as they come to terms with increased payments. Buy-to-let is likely to suffer next year and this is where product transfers may become more common. It would be nice to see lenders start recommending clients speak with their original broker in advance of fixed rates ending as we are better placed to offer whole-of-market advice. Next year will be tough but busy for brokers as clients recognize the good quality advice we provide.
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Mike Staton
Director at Staton Mortgages
I fully expect the BOE rate to achieve 4.25% and peak in June, causing fixed rates to continue to fall. The biggest areas of business we will see huge growth in next year will be the product transfer market and it’s about time that we saw more major lenders come on board with a full proc fee to recognise the hard work put in by all advisors to get any case over the mark, yet I expect to see several lenders once again throw brokers under the bus and cut out the intermediaries on a product transfer
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Imran Hussain
Director at Harmony Financial Services
I expect the bank of England base rate to hit its peak of 4.25%, which all research seems to suggest is where it may end up; we shall also see a more stable fixed rate product market, but rates will be between 4-5% on average the biggest areas we shall see a drop off is likely to be in the buy to let space from inexperienced or first-time investors, I would like to see more product innovation from lenders around criteria for the self-employed borrowers.
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Scott Taylor-Barr
Principal Adviser at Barnsdale Financial Management
2023 will see a few challenges I feel; affordability being the first, as lenders' affordability models have higher and higher costs factored in for staples such as energy and food, it will mean lower potential loans for any given income. A similar situation exists with buy-to-let, as landlords struggle to increase rents to keep pace with the requirements of lenders to pass their interest calculation ratio (ICR) tests. The next issue is potentially higher loan-to-value (LTV) loans; we tend to see lenders withdraw from smaller deposit mortgages when there is fear of house prices falling, this could be minimal and maybe it's just 5% deposit deals are at risk, but it could impact 10% deals too if prices fall further. That being said, the need for high-quality advice is greater than ever, so mortgage brokers will be in high demand
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Holly Dawson
Mortgage and Protection Consultant at Manchester Money
Holly Dawson, Manchester Money: "Lenders have money to lend and will be fighting to get that money out during Q1 and Q2, so rates should be around pre-pandemic level within those periods. Purchase levels will no doubt drop, in some areas of the country more than others. We are still seeing the migration from South to North and some of the smaller towns/villages, will still see an increase in demand. Remortgages though will no doubt be a larger part of advisers' business, so those who have looked after their existing clients as much as new clients over the years, won't be affected even if there is a big drop in purchases. The self-employed are still neglected by most lenders. This part of the market is ready for serious disruption and I'd like to see a lender be brave and far more flexible with their underwriting and affordability.
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Graham Cox
Director at Bridging Hub
My gut feeling is inflation will start falling quite quickly next year, which will perhaps allow the Bank of England to bring the base rate down to around 3 per cent in the second half of 2023. With mortgage rates at 4-4.5 per cent.

The biggest drop-off next year will be with first-time buyers, because I think 95% ltv deals will be hard to come by. Lenders and borrowers will get cautious as house price falls accelerate. The best thing lenders and the government can do is let them fall, and stop trying to extend and pretend with longer mortgage terms, gaurantee schemes and all the rest of it.
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Gary Boakes
Director at Verve Financial
Speaking to a number of BDMs, Lenders are now already priced ahead and have their strategies next year based on a 4-4.5% base rate and similar swap rates, so I’m expecting the rates to be fairly stable next year- which will be welcome. Unfortunately, we a long way away from rates being consistently below 4%, but stability and confidence in the market is key regardless of the rates.
Lenders generally like to start the year well to keep the shareholders happy so expect Q1 to have lenders dropping rates for short periods of time to get quick business.
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Amit Patel
Adviser at Trinity Finance
I expect rates to start at around 4% with a bumpy road ahead in the mortgage industry. Self-employed borrowers could do with a much-needed boost as they are often penalised when it comes to assessing affordability as their income can be sporadic.

The 2nd charge market will be huge in 2023 as people look to consolidate their debts.