Mortgage Rates in 2023: Will They Surpass 2008 Highs?

Estimated reading time 7 minutes

Back in June 2008, the average interest rate for mortgages in the UK hit high levels that had not been seen since the start of the decade. Two-year variable and two-year fixed mortgages both saw interest rates above 6%. This started a decline, which apart from one or two small jumps, continued for quite some time. Bring us into the present day and rates are now echoing and exceeding those we saw 15 years ago. Bank of England data shows that in January of this year, we were seeing an average of 5.17% on two-year fixed mortgages and 4.1% on the two-year variable. Now, 6 months on in June, they have risen further still.

The average two-year fixed mortgage now sees an average interest rate of just under 6% at 5.79% whilst the variable has risen to 5.11%. Compare this to just one year back and we can see that these jumps are certainly not slow. In 2022, both types of two-year mortgages had average interest rates of under 3%.

For information purposes, all of the figures above and in the chart below are based on a 75% LTV and these rates may not be offered to you should you apply for a mortgage.

So, what is going to happen next? Calls for government assistance have been loud. With rates continually rising in a world where the cost of living has been driven higher than we can remember, budgets are being squeezed in more ways than one.

Such rises have seen some people turn to cash house buyers so they can get a quick house sale and downsize in the hope of paying less on their mortgage. For others, it has meant prolonging the stay in rented accommodation or with parents as they try and save more money towards the costs a current mortgage would accrue.

So, in this blog, we thought we would take a look at the 2023 mortgage rates and see what might be happening.

How much have mortgage rates changed?

Using data from The Bank of England we are able to see just how much the average mortgage rate has risen over the past few years.

Year 2 Year Fixed Rate 2 Year Variable
June 2013 2.63% 2.91%
June 2014 2.6% 2.71%
June 2015 1.99% 1.56%
June 2016 1.75% 1.62
June 2017 1.48% 1.42%
June 2018 1.74% 1.56%
June 2019 1.64% 1.6%
June 2020 1.41% 1.66%
June 2021 1.39% 2.24%
June 2022 2.87% 2.54%
June 2023 5.79% 5.11%

How can I get a better mortgage rate in 2023?

The headlines have certainly made for grim reading and many people naturally are holding back, but could that be risky? It is thought that mortgage rates will eventually drop. However, if time is of the essence and you need to move sooner rather than later, you need to shop around first.

Spend some time searching various lenders to see what they have on offer. Occasionally you strike gold and find something that is better than expected. It should perhaps be mentioned that before turning to Google, you should have an idea of the type of mortgage you want. Would you prefer a fixed, variable, or special rate mortgage? Rates can vary significantly between them all and the varying terms can have a mixture of pros and cons.

Then look at the amount of money you have saved as a deposit. The more you have here, the less you need to borrow. This then reduces the LTV (Loan to Value) which allows you to get better deals. Rushing into a mortgage just because you have a deposit can be a bad move so look at all of the options. If saving for an extra few months could save you considerable sums in the long run it could be worth waiting.

Online mortgage calculators will give you an idea of rates and once you have found some that seem suitable and ultimately affordable, visit a mortgage broker. Here you will be able to have presented to you all the best offers currently available based on your deposit, personal circumstances, and the price of the property you are looking for. Our first-time buyer mortgage guide gives valuable insight into how to secure the best deal for you. Ultimately the four main factors that will secure you the best mortgage rates in 2023 are:

  • Finding the best provider
  • Minimising the lenders risk by having a higher deposit
  • Timing – Watch the rates and make an educated decision
  • Choosing the right type of mortgage

Will the interest rates fall in 2023?

Looking at the figures you would be inclined to say no, but there is hope. Many experts in the field of finance and property are full of belief that we could see rates hit 3% by the end of 2026. So we could see gradual trickles downwards throughout the remainder of 2023. There is scheduled to be a decision on base rates in early August by The Bank of England’s Monetary Commission but hopes of it coming down seem slim when you look at the current performance. It has been raised 13 times in a row now so many are expecting it to reach 14. Of course, the rise earlier this month (June 2023) saw it hit 5%. Where we end up in August is still unknown.

How high can the interest rates go?

This is a question asked often and it’s understandable as to why. With people struggling to afford housing they want answers! Figures show that in the past we have seen rates as high as 17% but it is certainly not expected to see that level. In fact, many experts believe that the base rate will be 6% at the end of 2023.

This isn’t always bad news though. Tracker mortgages for example will always move with the base rate, so when it’s rising, so is the mortgage rate but when it drops, so does the mortgage.

Fixed-rate mortgages though have weathered the storm a little better, despite base rate rising, fixed rates have been seeing decreases since November 2022.

What should I do if mortgage rates increase again?

A rise can see you spending a lot more money without really getting anything back in return. It’s dead money so try and find a way to stop that happening.

If you can fix your mortgage to a set term, you will be kept at that rate for a set period. This can be hugely beneficial. Alternatively, if a remortgage is due within the next 6 months, get a new rate agreed now and then when your current deal ends, switch! This way you avoid early repayment charges, a further benefit of this is that if rates were to drop lower before your deal ends you can then switch it again.

What if the mortgage rates decrease?

If rates look like they are on their way to decreasing and you have only just secured a mortgage that you felt was best at the time, chances are there is now a much better option available. You may not be able to take it right away but opting for a short-term fixed-rate mortgage means you have the original rate for less time and find it easier to swap to these new lower rates when the time comes.

Earlier on we mentioned considering the different types of mortgages and this is where variable-rate mortgages can be worthwhile. A tracker deal moves with the base rate so when it drops, so does your mortgage. Just be aware that your mortgage rates rise when the base rate does with a tracker mortgage.

It can be a tough time for homeowners, and many are considering selling to get themselves out of a mortgage nightmare. If this is a situation you find yourself in, speak to Gaffsy, we buy any house regardless of where it is and its condition. That way you can move onto a new, more affordable home quickly and escape the high costs your current mortgage is weighing you down with. We will make you a free cash offer and should you accept, the cash can be in your account within as little as seven days! Contact us today to see how quick and easy it can be with Gaffsy to sell your home!

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