Fixed Mortgage Rates Starting To Fall

Fixed Mortgage Rates Starting To Fall
Disclosure: Clicking on links on this page may earn us a small commission. This helps us continue to produce free content and doesn't affect the price you pay.
10 January 2023 – As we head into a new year, fixed mortgage rates continue to fall, despite the base rate going up.

After the ill-fated mini-Budget, the market got spooked and mortgage rates soared in September, with two- and five-year fixed-rate mortgages both exceeding 6%.

Since the appointment of a new Chancellor and Prime Minister, the markets have calmed down and mortgage rates have started to fall again.

An average two-year fixed mortgage is now at 5.75% and the five-year fixed rate is at 5.58%, according to data from Moneyfacts.

Millions Will See Their Mortgage Costs Rise This Year

Despite the rates falling, it is expected that about four million households with a mortgage will see their mortgage payments increase by £3,000 per year in 2023, according to the Bank of England.

This will be an increase of an average of £250 per month, as millions of fixed-rate mortgages expire and borrowers move to higher rates.

In the past few years, the UK has profited from exceedingly low mortgage rates, between 1% and 2% for various fixed rates. But due to rising inflation, mortgage rates have started to rise since 2021.

And now that millions of mortgages are up for renewal, the rates are more than double what they were when the mortgages were first taken out.

This will put further pressure on already stretched household budgets during a cost-of-living crisis.

First-time buyers will also struggle to afford to buy a home. Not only due to higher mortgage rates, but also because house prices have risen by 23% since the start of the pandemic in March 2020.

The cost-of-living crisis has also meant that many had to dip into their savings to cope with rising living costs, thereby reducing their deposits.

Rents have also risen sharply in the past two years, making it even harder for would-be first-time buyers to save up for a deposit.

As a result, many buyers have decided to put their plans to buy a new home on hold to see what the market will do in the next few months.

This has led to a decline in buyer demand and, as a consequence, to a slowdown in the housing market.

Falling Prices Could Re-Ignite The Market

With rising mortgage costs and fading demand, house prices have started to fall in the past four months. 2022 ended with an annual house price growth of 5.6%, according to the latest House Price Index from Rightmove.

It is now widely expected that property prices will fall this year, reflecting the tough financial situation the majority of Brits are facing.

We’re heading towards a more even balance between supply and demand next year, but we don’t expect a surge in forced sales which would cause a glut of properties for sale and contribute to more significant price falls in 2023. This is reflected in our prediction of a relatively modest average fall of 2% next year.

Tim Bannister, Director of Property Science at Rightmove

While the property portal predicts a mere 2% fall in prices this year, others think that prices might drop more sharply. The National Association of Property Buyers (NAPB) predicts a fall in property prices by up to 6%.

Halifax forecasts a price drop of 8% over the course of this year.

As the property market slows down, lenders will start to drop mortgage rates to attract customers. Combined with lower prices, this could re-ignite the property market.

Rightmove has already reported an 11% increase in the number of views of homes for sale on the property portal in December 2022, compared to December 2021.

This shows that buyer demand is still there, but many bide their time to monitor the market and wait for more favourable conditions.

At the same time, more houses are coming on the market. Rightmove’s data shows a 6% increase in new sellers going live in December 2022 in comparison with the same period last year.

This will balance demand and supply even further, putting downward pressure on house prices in the next few months.

Sellers Will Still Make A Profit

Despite house prices being forecasted to fall this year, sellers don’t need to worry. The sharp increase in house prices over the past three years of 23% will ensure that most sellers will be able to make a profit, even if prices fall.

The double-digit increase during the pandemic has also meant that sellers who sold their home in 2022 and bought it within the last 20 years have made a record gross profit of £108,000. This is the first time that profit has reached the £100,000 mark.

The data, from research by Hamptons, also shows that 94% of sellers who sold in 2022 have sold it for more than what they bought it for, if they have owned it for an average of 8.9 years.

Statistic like this should give potential sellers a reason to be confident.


  • News Desk

    Our news desk team includes a qualified architect, a freelance journalist, and a fanatical property expert who has over 12 years experience in the industry.

    View all posts
Checklist - 101 Ways To Sell Your House Faster

101 Ways To Sell Your House Faster eBook


FREE Checklist: 101 Ways To Sell Your Home Faster

When you subscribe to our email newsletter. Plus, receive a 7-day crash course on how to get higher offers on ANY type of property.

You can unsubscribe at any time.
See our Privacy Policy.