Year in Review: 2022

In a year that’s seen three different prime ministers, two different monarchs and Russia declare war on Ukraine, it’s no wonder that stability hasn’t exactly been the word on everyone’s lips when it comes to finances. 2022 has been a difficult year for mortgages specifically, with some significant changes making the headlines.

As fuel prices continue to put pressure on inflation and the cost of living crisis pushing more and more families into crisis, what does 2023 hold for interest rates and mortgages? Let’s take a look at the biggest mortgage news from this year and some predictions for the year to come.

Interest rates see their biggest increase in years

The Bank of England base rate began 2022 at just 0.25%, with mortgage rates similarly low. Anyone taking out a fixed rate mortgage at the beginning of the year was set to end the year very relieved, as rates rose no fewer than seven times, leaping from 2.25% to 3% in November 2022, the biggest single rise in thirty years. As the year progressed, new buyers and existing homeowners looking to remortgage began to panic as rates crept ever higher and monthly repayments started to lurch upwards.

Liz Truss’s mini-budget

September’s mini-budget brought much confusion, not least for homeowners and potential buyers. Thousands of people were left in limbo, unsure whether or not their mortgage deals were going to go through, as a staggering 40% of mortgage products were pulled amid the chaos caused by Truss.

Mortgage providers were forced to withdraw significant numbers of products when they simply could not price them accurately with so much instability in the financial markets following the mini-budget.

Stamp duty cuts honoured

October saw Jeremy Hunt step in and reverse many of the tax cuts promised by Truss in September’s mini-budget, but one tax cut that wasn’t reversed was the doubling of the stamp duty threshold from £125,000 to £250,000.

This higher threshold has brought down the cost for those looking to get a foot on the property ladder, taking some of the sting out of the tail of ever increasing mortgage interest rates.

What’s going to happen to mortgages in 2023?

With inflation currently at its highest rate for over 40 years, interest rates aren’t going to be coming down anytime soon, and if you’re in a position to fix your mortgage now, then it’s worth doing as soon as possible. The markets are predicting another rise in rates before the year is out and then further increases in 2023. Some forecasts see rates getting as high as 6% in 2023, others are more moderate, but it’s safe to say that further increases of some kind are fairly certain.

Higher mortgage rates alongside the continuing cost of living crisis look set to shrink the housing market in 2023, as fewer first-time buyers can afford to take the plunge and investment buyers are hit by increasing costs. Lenders have already been reporting a drop in average house prices at the end of 2022, and this trend looks set to continue in 2023 as demand falls.

Overall 2023 is set to be a tough one across the board as the UK struggles to get inflation under control and recession looks likely.