Mortgage Market Overview – August 2023

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Published on 6 September 2023

Stay up-to-date on the latest mortgage market trends and industry news with our monthly updates. Our team of expert advisors provides insightful analysis and expert commentary on a range of topics, including mortgage rate trends, housing market forecasts, and industry updates.

Bank of England Base Rate 5.25% (Increase of 0.25%)

Market Overview

Positivity and Uncertainty”

The Bank of England raised interest rates by 0.25% on Thursday 4 August 2023, the 14th consecutive rise since December 2021. The Governor of the Bank of England emphasized its commitment to maintaining these rates until both wages and prices stabilise. They would need longer term indication of an inflation decline before considering rate cuts, so higher rates could be around for a while longer.

“Inflation slowed markedly for the second consecutive month, driven by falls in the price of gas and electricity as the reduction in the energy price cap came into effect.”

Reports now suggest, that whilst Inflation fell to 6.8% in July the third consecutive monthly fall in the cost of living, it’s still likely we will see another increase from the Bank of England in September. Slowing inflation means that interest rates aren’t expected to rise by as much as they previously were. A few months ago we were expecting rates to peak at 6.5% but expectations now are 6% or even 5.75%. 

  • Some welcome relief for mortgage customers as mortgage lenders reduce rates as swap rates start to settle.
  • Competition returns as mortgage lenders continue to fight for new business, reducing interest rates to entice new borrowers.
  • The best two-year fixed today stands at 5.75% whilst leading three-year deals are 5.54% and five-year deals are 5.19%.
  • As of 1st September, there were 5,338 residential mortgage deals on the market, compared to 5,056 last month as lenders begin to reintroduce deals as the market settles.
  • Regional house price to earnings coupled with modest reduced purchase prices make home buying more affordable (Zoopla)
  • Annual house price inflation slows to +0.1% lowest since 2012. (Zoopla)
  • House prices experienced a dip of 0.1% between June – July according to Halifax data.
  • Reports from capital economics predict a potential 5% drop in UK house prices over the next two years

Biggest Challenges

  • Rising cost of living – Smaller deposits.
  • New Homes demand outstrips supply.
  • Lender affordability and loan to income caps – Restricting lending.
  • Lack of Government support for first time buyers.

Mortgage News Snapshot

  • Skipton 100% “Track record deal” now open to previous homeowners – 5yr fixed rate 6.19% (Houses only)
  • Coventry Building Society continue to accept developer incentives of up to 10%
  • Kensington offering enhanced affordability on “Hero” products for employed Key Workers and young Professional range of products for under 40yrs
  • HSBC, Nat West, Aldermore & BM Solutions “reducing rates today”
  • Aldermore launch a range of limited edition buy-to-let products for portfolio landlords
  • Generation H Reduces five-year homebuying bundle rates at 95% LTV now available at 5.97% with a £999 fee and 6.03% No fee
  • Along with several mortgage lenders Accord will now consider clients on zero-hour contracts
  • HSBC increase mortgage term to 40 years
  • Leeds Building Society launch energy tool for customers to help monitor energy use at home

Dates to be mindful of

  • The next Bank rate decision will be announced on 21st September 2023.
  • (ONS) Office for National Statistics inflation figures due 20th September 2023.
  • EPC cap will fall to £1,923 for the period October to December 2023.

Despite the Bank of England’s incremental interest rate hikes, expectations are a slower rate of increase. This indicates a more manageable future for borrowers. Mortgage lenders continue to respond well with rate reductions and increased competition. While challenges persist, there is optimism. The rising cost of living and limited first-time buyer support are hurdles. But the market displayed stability with an increase in residential mortgage options as lenders continue to innovate, showing their commitment to meeting borrower needs.

A mortgage market that’s adaptable and resilient. Borrowers can take advantage of competitive rates and lender innovations, ensuring a brighter outlook for those navigating the mortgage landscape.

As always, the team are on hand 7 days a week to answer any queries you have. And remember our advice is free. Get in touch today on 0800 098 7177 or book a call back.

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