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Mortgage pricing expectations

Journalist: Anna Sagar, Mortgage Solutions / Specialist Lending Solutions

ended 04. January 2023

Interested in talking to mortgage brokers about mortgage pricing and their expectations for this year. 

  1.  Mini budget pricing has started to unwind, what level do you think we will settle at and how long do you think it will take to unwind? 
  2. Will we ever get back to sub-one per cent mortgages? 
  3. What are the biggest factors for mortgage pricing people should keep in mind? 
  4. What impact will this have on prospective borrowers?

10 responses from the Newspage community

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Riz Malik
Independent Financial Adviser at R3 Wealth
Mortgage pricing will be competitive in early 2023 as lenders cut their margins to gain market share as financial markets remain stable. The Truss premium has disappeared, but increases in the base rate have offset this. Rishi has shown us so far that he is very vanilla, and this is unlikely to change so no risky moves are expected. Those coming off mortgage deals in 2023 which start with a 1 are going to be sorely disappointed.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Inflation is still running hot, so the Bank of England will be forced to increase the rate further. I expect the base rate to settle at 4.25% in the late Spring. However, I expect the bank to hold rates there far longer than necessary and won't ever return them to the levels we saw for over a decade. Government borrowing rates won't come down at the pace base rate will. In a post Brexit, post-Covid world the UK has a new normal to adapt to, and that includes long term borrowing rates not the same as Germany and France, but more like Spain and Portugal. Credit markets don't have the same level of confidence and an inept government strengthens their argument. When Labour win the next general election there could be a pricing boost for mortgages, but until then rates will be higher for longer.
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Justin Moy
Managing Director at EHF Mortgages
Fixed Rate pricing will take the best part of the next 12 months to settle - there are so many factors that influence the pricing of products, if inflation and demand do drop as the markets suggest, we will see rates in better shape by Q4 latest. It is unlikely we will have rates anywhere near 1% unless the country experiences an extreme recession over a long period, so I would encourage borrowers to expect the new normal range of 3-4% for mortgage rates, and if we go below this, it's a real bonus. For new borrowers, speak to an Independent Broker and establish your budget, check the monthly costs, and take your time finding a property - don't feel rushed by the Estate Agent. Rates of 3 or 4% are still good value when you look at historic mortgage pricing
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Craig Fish
Director at Lodestone Mortgages
I hope that by mid-2023 we are seeing fixed rates settle between 3 & 4%, with the potential to then drop further if/ when the BOE base rate starts to reduce. The days of sub-one percent mortgages are well and truly over, never to be seen again. The key thing that borrowers need to keep in mind right now is flexibility. They need to ensure that they keep their options open wherever possible or at the very least not tie themselves into long-term fixed rates for now. This will give them the benefit of not paying at the higher rates we are currently seeing for too long, allowing them to switch to lower rates sooner rather than later.
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Gary Boakes
Director at Verve Financial
The expectation from a lot of the forecasts and lenders is a BOE base rate of around 4.5% peaking around the summer so the rates we have at present are priced with that in mind, so im expecting rates to be fairly stable this year unless we see the base rate/swap rates affected like the mini budget. We will however see the competitive nature of the lenders throughout the year as they fight for market share so we will see lenders cut margins to grab business and then increase rates are service levels suffer.
Im afraid though that anyone expecting rates to get back to 2% are living in a dreamland and if we see sustained rates under 4% this year that will be a massive step in the right direction.
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Austyn Johnson
Founder at Mortgages For Actors
The way the rises have been going, it seems that the big silly jumps have stopped and they are just fine-tuning now. it may be that they rise another 0.5%, but it should level out relatively soon and stabilise for a good few months before they can tell which way inflation is going.
As long as swap rates stay stable, the housing market will be a little more predictable. This will greatly help new buyers as well as movers. Who wants uncertainty in this day and age?
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Matthew Jackson
Director at Mint FS
Short answer is No , we will not return to sub 1% mortgage pricing - This was the blip in interest rates, we are now returning to the norm of stable pricing between 3% and 5% dependant on the economic enviroment and trends at the time.

With house prices only predicted to fall at circa 9% this year the impact of this for new lending will be that the average repayment term will get longer to keep the repayments more affordable. Lenders are moving to 40 Year terms and i would suspect this may even extend out to 45 Years at some stage this year.

Fixed rate money will continue to fall and i would suspect will settle at just under 4% for lower loan to value lending by the end of Q1 this year.
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Sabrina Hall
Mortgage Adviser & Protection Adviser at Kind Financial Services
Whilst I don't think we will ever get back to the super low rates that we saw in 2020/2021 I do feel that we still have an element of correction to happen from the knee jerk reaction to the mini budget. The problem is that we are going to see a slow correction because non of the lenders want to show their hand and stand out from the crowd with their rates for fear of being bombarded with cases that they can't service all in one go. I predict that we will continue to see slow and steady rate deductions for a few months yet.
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Michael Webb
Managing Director at Mortgage Republic
The golden era of Sub 1% lending is a distant memory, likely never to return. Rates have of course started to reduce from the fear-led pricing that lenders had in late Autumn 2022. The most important factor we will see moving forward will be supply and demand for mortgages. Currently, we face no supply issues for lending. The demand has dropped somewhat, and as such banks still need to lend money- so as Q1 gets into full swing I fully expect to see lender competition start to drive down the rates on offer. But remember, that it is relative to where the base rate has come up to over the past few months, so we will not see silly low rates again.
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David Robinson
Co-Founder at Wildcat Law
Sub 1% mortgages have gone the way of the Dodo and Quagga. We will regale our grandchildren of tales about them, much as ours told us stories of high double-digit interest rates.
Stagflation is the real threat at the moment, if we manage to stay within single digits by the end of this decade then we will have done well. Let us hope that double-digit mortgage rates are one dinosaur that is not brought back from the history books.