More ups and downs? – What will the mortgage and property market look like in 2023

2023 with a small toy house

If I am being honest, 2022 was a bit of a bumpy ride wasn’t it. So, what can we expect from the mortgage and property world in 2023? Will it be another unsettled one or can we look forward to some stability?

What are the big questions for the coming year?

I am not going to try to play the mystic this year because, based on the last few years, I am worried that anything I predict will make me look silly by February. So, rather than take a wild guess let’s look at the questions we are being asked about next year.

Which way will mortgage rates go in 2023?

Well first let’s remember that the rates have been incredibly low in recent years. Also, the recent turmoil in government, such as chopping and changing Prime Ministers, and wildly different financial policies, had a very unusual effect on the base rate. So basically, we are looking at a rate that was created by unique pressure coming from unexpected external forces. Anything in the financial world that is affected in this way tends to shift back to a more middle ground. So, if pressed for an opinion, and assuming nothing wild and unusual happens, I would say they will go down, but not by much. They have already moved down a little and if things settle in the new year, a 5 – 5.5 % rate is probably going to be the new normal at least for part of the year.

What about property prices?

This one is not as easy as it seems. The temptation is to say they will drop – because they probably will. Again, here we need to remember that over the last few years, house prices have rocketed and outstripped expectations. What we are probably seeing is prices settling back to a more reasonable level than anything else. A softening rather than a plummet. So the question is more how much they will drop by rather than if they will drop. Nationally most pundits, banks and building societies are predicting a minimum of around a 6 – 10%. However, there is much more to it than a big, blanket prediction. The honest answer could well be ‘price stability depends what sort of house and where you live in the UK’. If you are in a property that is attractive to a particular demographic, say first time buyers, in an area where the availability of such properties is low, then local area prices may well hold.

Before we leave this question though, can I throw in a possible unexpected answer. I think there is a chance that the market will bounce upwards again faster than expected. If the expected recession is not as bad as some people say and mortgage rates stay reasonable, then a stable market could well generate a steady price increase again. For example, there is still a shortage of properties in many areas and shortages and price drops don’t usually go together. So, not only may we not see the huge crash some people are suggesting, but we may also not see much change at all.

When will be the best time to move house or buy new?

There is an argument that says there is never such a thing as a good or bad time to buy a house. There is simply the time ‘right time’ for you to buy a house. If put the context I used for the first two questions into the equation and assuming nothing unexpected happens, then the house prices are just temporarily bouncing around as are the interest rates. So, yes, if you assume a scenario where house prices crash in the coming year and mortgage rates rise, then clearly that isn’t ideal. However, mortgage rates have already started to fall, and the price drop hasn’t been anywhere near as bad as some people predicted. Mortgage rates may rise again but, if you budget for that potential in advance, then you will be ready if they do. If house prices do fall you could find yourself looking for a much smaller mortgage and getting a real bargain when they rise again. Conversely if house prices pick up and we see a steady rise again later in the year, you could find yourself regretting waiting. The best time to move will always be down to the right time for your circumstances.

Again here, can I throw in a little thought to demonstrate how unsettled things have been over the last few years. In the recent past, during the covid epidemic, the government stepped in to ensure the housing market stayed dynamic. The last predicted ‘terrible event’ therefore didn’t happen. The point here is that despite the size and stability of the housing market overall, strange things do happen. So, deciding the best time to move isn’t always that simple. Take advice and weigh your options before deciding.

Will I still get a mortgage if the situation is still so up and down?

Ah, an easy one at last. Yes, if you can afford it and you meet the criteria, then yes, absolutely you will. In fact, if the market starts to slow, the mortgage companies may react with new offers and good deals to encourage sales.

All the above is just speculation on my part and you should always take independent, qualified advice before making a decision. The honest answer is that there is really no crystal ball so you must apply the current situation to your personal circumstances. Over 100,000 residential property transactions happened in October 2022 according to the .gov published information. My point here is that it is a huge marketplace to try to predict. By the end of January, we could be looking at totally different answers to these questions. The important thing is to make your decision based on what works for you and to take the right advice, so you are making an informed choice.


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