10th January 2023

After a turbulent 2022, the new year brings hope and uncertainty in equal measure. So, what does 2023 have in store for the housing and mortgage markets?

Back to normal?

Average mortgage rates rose sharply after the ‘mini-budget’ announced by former Chancellor Kwasi Kwarteng in September 2022. Although significantly higher than at the start of last year, average rates are expected to continue to settle into 2023.

Higher and lower

The low rates of the past decade, therefore, seem to be over, with mid-single digits now the norm. For mortgage holders, the new reality of higher rates will obviously have a knock-on impact on household finances, which are already squeezed.

A further effect could be a downturn in the housing market. House prices are expected to fall in 2023, after three pandemic-influenced years of growth. The astronomical year-on-year rises of 16% in July 2022 and 13.6% in August 2022 (which took the average house price to a record high of £296,000) are unlikely to be seen in the coming years1.

Supply and demand

Instead, estate agent Savills predicts a 10% fall in house prices in 2023 before a return to growth from 2024 onwards.

The exact figures will depend on the various factors that influence supply and demand. In 2022, as demand waned, house prices remained resilient due to limited supply. Supply is not expected to increase much in the coming years, analysts warn.

Demand, meanwhile, could receive a boost from the raising of the nil-rate threshold of Stamp Duty in parts of the UK, while pandemic factors such as the need for more space and a home office might still play a part. If a modest decline in house prices takes place, with possible regional variations, desire to buy could be further accelerated.

Your future

With further Bank Rate increases likely in 2023 amid ongoing cost-of-living concerns, the economic conditions remain challenging for many. We can guide you through the busy market and help you stay focused on your goals in 2023.

1Office for National Statistics, 2022

As a mortgage is secured against your home or property, it could be repossessed if you do not keep up mortgage repayments