Mortgage Market Overview – June 2023

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Published on 28 June 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 5.0% (Increase 0.50%)

Market Overview

The increase of 0.50% was a surprise following the announcement from the Office for National Statistics that inflation had remained at 8.7% in May. This is more than four times the government’s 2% target. Many mortgage lenders had factored in a smaller increase, meaning further increases to rates are expected over the coming days. As the market factors in further interest rate rises with predictions that the Bank of England base rate may rise to 6% by the end of 2023 and expectations to fall back more slowly over the next 5 years settling at around 3.7%.

  • Swap rates (the benchmark interest rates used by banks when they lend to each other) remain volatile causing uncertainty for mortgage lenders trying to benchmark pricing.
  • Swap rates, 5-year money is cheaper than 2-year money indicating that the markets think the higher rates will be short lived.
  • Longer term fixed rates are currently lower than 2-year fixed mortgage rates showing the predictions of a slightly longer return to low interest rates. Although once the base rate settles it is predicted that lenders will be competing for business with money to lend, this could bring much needed competition back to the market. 
  • The most competitive mortgage deals whilst writing 4.99% for a two-year fix, 4.89% for a three-year, and 4.59% for a five-year deal (still compare favourably to highs of more than 6.50% in October 2022)
  • There is higher client demand for base rate tracker and discounted mortgages with no tie in period, giving clients flexibility to watch the market.
  • House price inflation slows to +1.2% as quarterly growth rate turns positive following pick-up in sales activity over Spring. With sales agreed running at 8% above the five-year average. (Zoopla)
  • Demand for new-build properties from buyers increased by 0.7 per cent in the second quarter of this year. Bristol saw the biggest jump in demand from buyers, rising by 15 per cent from the first quarter (Easy Money)

Economists prediction of the base rate peaking at 6%” but there was some good news, MPC expects inflation to “fall significantly further” during the rest of the year, and markets are expecting it to begin cutting interest rates by the middle of 2024 – Zoopla

Biggest Challenges

  • Challenges for mortgage lenders setting fixed interest rates.
  • Frustration for mortgage advisers and clients with last minute interest rate changes.
  • Mortgage affordability restrictions.   
  • Inflation, cost of living – uncertainty.

Mortgage News

  • Skipton 100% mortgage available to first-time buyers who have paid their rent for at least 12 months current interest rate 5 year fixed 5.89%
  • Tip for buyers: Some mortgage lenders will allow a mortgage product to be reserved when submitting a decision in principle.
  • Mortgage offer extensions are available (9-month to 12-month offers) with the ability to keep today’s rates.
  • Skipton updated visa criteria now lending up to 90% Loan to value.
  • Cheapest 95% loan to value 5-year fixed rate, Skipton at 5.44%.  
  • Possible further restrictions to come for lender affordability. As many lenders review residential affordability rates and household expenditure figures that are used for affordability calculations.
  • Halifax eased interest-only criteria, reducing max income levels and increasing loan to value to 75%.
  • Mortgage lenders have committed to implementing a waiting period of 12 months before initiating any repossessions.
  • Lenders have agreed to offer temporary solutions to help struggling homeowners. In the short-term they can switch to interest only or extend the mortgage term. They will be offered both options for 6 months aimed to help keep monthly payments down.

Dates to be mindful of

  • EPC price cap changes to £2,074 from 1st July to 30th September 2023 with a positive further reduction predicted from 1st October.
  • The next Bank rate decision will be announced on 9th August 2023.

Top Tip – Affordability, if you are thinking of buying or moving you might want to act quickly. Reports of lenders updating affordability models based on the most recent ONS data (due to higher inflation) will have an impact on how much people can borrow. If you are already mortgage qualified but are undecided to buy, a decision in principle today will be based on today’s affordability. You may find the amount of borrowing could be much less in the months ahead when these new affordability models kick-in. So getting a decision in principle now will give you peace of mind and the time to find the right property.

June has been a month of uncertainty, with lenders pulling interest rates. This was followed by a base rate rise that was predicted to be 0.25% finally landing with a 0.50% increase. News channels love to bang the drum with negative headlines, so it does feel like a lot of doom and gloom. But we must remain positive, sales are still being made and lenders still want to lend. What we need now is stability and we must adjust to this new normal. Ensuring you receive expert mortgage advice has never been more important. 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.

177 Mortgages and 177 Protect are open 7 days a week. We’re always happy to talk through your mortgage, specialist finance and protection needs in more detail. If you’d like to book an appointment or simply find out more information, please get in touch.

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