What’s going to happen in the mortgage market in 2023?

David Lauder, Independent Mortgage Adviser with ESPC Mortgages, makes some predictions for the 2023 mortgage and property market.  

In the current market and financial climate, making predictions for the coming year is a difficult task. However, here is some of the activity I expect to see in the mortgage and property market in 2023.  

Will 2023 be a sellers' or a buyers' market in Edinburgh and the surrounding areas? 

For most clients, it has remained very much a sellers' market for much of 2022. This is due to a lack of stock being available and plenty of willing buyers after lockdown, meaning competition has been strong and property selling prices have regularly achieved well over the Home Report valuation over the course of the year. 

However, due to the recent interest rate increases, we are starting to see signs of the market slowly cooling down with less activity at the end of 2022. Despite this, properties on average still achieved 105.9% over Home Report valuation and remained pretty consistent for the last quarter of 2022. 

As 2023 progresses, the hope is that sellers’ confidence will remain which will see more properties come to market for sale again. 

Interest rate changes in 2023 

There were several Bank of England rate rises during 2022 with the single biggest rate rise since 1989 happening in November from 2.25% to 3% and then in December a further 0.5% increase to 3.5% reaching its highest in 14 years 

It is difficult to predict what will happen in 2023 and much will depend on inflation. However, the Bank of England is expected to keep pulling tight on the monetary policy rope to try and tug inflation down with forecasts that interest rates may reach anywhere between 3.5% and 4.75% – this is less than initial predictions after the mini-budget.  

The good news is we have seen some stability at the end of 2022 with mortgage interest rates and are now regularly receiving fixed rate reduction changes on new products rather than increases which is positive. 

Increase in the number of 5-10% deposit mortgages available 

Mortgage lenders are still showing a greater amount of confidence as we reach the end of 2022 with a wider range of lenders willing to consider a 5% deposit selection subject to eligibility which is very positive. 

This can only be good for the client meaning more people can find a solution within an affordable budget. This should help first-time buyers in particular, who are perhaps renting at present and in essence paying someone else’s mortgage.  

The challenge for many clients with smaller deposits has been the common theme of certain properties going well over the valuation – sometimes 10% plus. Mortgage lending is based on the lower of purchase price or valuation which means any price paid over the value cannot be used as part of the deposit for mortgage purposes, for this reason deposits often need to be higher than 5%. The hope for these clients is they will now have a better chance in 2023 of getting properties closer to Home Report value and therefore finding it easier to fund the mortgage deposit with less money required for bidding over valuation and also getting more house for their money. 

Hopefully there can be help available from Government initiative schemes that can provide further aid and options during 2023, although no firm details of any new initiatives are available at present. 

What impact will recent events have on the Edinburgh property market? 

The Edinburgh market is certainly better placed and more robust than almost all of the rest of the UK and should still remain strong during these times.  

ESPC Mortgages 

To summarise, we at ESPC Mortgages remain optimistic for 2023. The mortgage market is still competitive and there are good solutions to be found, tailored to the client’s needs. The team look forward to this continuing throughout 2023 and to another successful year of mortgage approvals.  

We will work to help more and more people get their dream property and are available to help existing and new clients review their existing mortgage arrangements to ensure they have the most suitable solutions during their mortgage journey. 

ESPC mortgages offer expert independent mortgage advice in Edinburgh. Whether you are looking for first time buyer mortgage advice, are interested in finding out more about buy-to-let mortgages or would like to re-mortgage, get in touch with the team on 0131 253 2920 or fsenquiries@espc.com 

ESPC magazine

This article appeared in the January 2023 issue of the ESPC magazine. Find out more about the ESPC magazine and read the latest issue online. 

The initial consultation with an ESPC Mortgages adviser is free and without obligation. Thereafter, ESPC Mortgages charges for mortgage advice are usually £395 (£345 for first-time buyers). YOUR HOME MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON A MORTGAGE OR OTHER LOANS SECURED AGAINST IT.

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