ESSENTIAL INSIGHTS FOR BORROWERS

As we navigate into the second half of 2023, the UK mortgage market remains dynamic, adapting to the ever-changing landscape influenced by economic, technological, and social factors.

Interest rates, housing affordability, and consumer preferences are just a few driving forces shaping the landscape of the mortgage industry. It is essential for borrowers to stay informed and understand the current market dynamics to make well-informed decisions about their property financing needs.

KEY TRENDS IMPACTING THE 2023 UK MORTGAGE MARKET

0% Deposit Mortgages

Skipton Building Society launched the UK’s first 100% no-deposit mortgage since 2008, in May. To be eligible for the scheme, hopeful borrowers must present 12 months of on-time rent payments, as well as a good credit history to be approved for a five-year fixed deal.

Skipton is the only lender that provides 0% down-payment mortgages, adhering to rigid lending guidelines. Moreover, moving expenses, including legal charges and stamp duty, are still expected to be incurred by the home buyer. Also, there is a requirement for punctual rent and household bill payments for a continuous period of 12 months within the last 18 months, and only available to renters and first-time buyers aged 21 and over.

Interest rates and mortgage rates

The Bank of England has raised interest rates several times since December 2022, in an effort to control inflation. As a result, mortgage rates have also risen to their highest levels since 2008. This rise in interest rates is likely to have a cooling effect on the housing market, but it is not expected to deter all buyers. The most recent set of inflation results has had an effect on the cost of borrowing and it is hoped this will help interest rates to start dropping again.

Housing demand and affordability

Low mortgage rates had previously helped drive demand, but as rates rise, buyers are becoming more cautious. This is particularly true for first-time buyers, who are more sensitive to changes in mortgage rates. Despite this, buyers still have opportunities in 2023. For example, property prices have started to decline in some areas, which can make it easier for buyers to get on the property ladder. Additionally, there are many government schemes available to help first-time buyers, such as the Help to Buy scheme.

Overall, the housing market in 2023 is expected to be more challenging than in recent years. However, there are still opportunities for buyers who are prepared to be flexible and shop around.

ESG factors in mortgage products

Environmental, social, and governance (ESG) factors have gained prominence in the 2023 UK mortgage market. Lenders are increasingly offering green mortgages, which provide preferential terms for energy-efficient homes or eco-friendly renovations, and incorporate ESG considerations into their lending criteria. This growing trend reflects the rising awareness of sustainability and social impact among both borrowers and investors.

Growing demand for flexible mortgages

In 2023, many borrowers are looking for more flexibility in their mortgage terms. Lenders are responding to this demand by offering more flexible mortgage products that cater to the changing needs of borrowers. For example, some lenders offer offset mortgages, which allow borrowers to use their savings to reduce their mortgage balance and interest payments.

Others offer overpayment facilities, which allow borrowers to make extra payments towards their mortgage without incurring penalties.

Regulatory changes

The Financial Conduct Authority (FCA) proposed regulatory changes to the mortgage market to better support borrowers facing financial difficulties. The proposed changes include allowing firms to capitalise payment shortfalls when appropriate, instead of limiting it to cases with no other viable options. The FCA also aims to improve disclosure and recording of communication with customers in payment shortfall situations. These changes are in response to identified issues, such as firms not offering forbearance before borrowers missed payments and lacking tailored support for individual customers. The FCA's goal is to ensure that mortgage firms take a more balanced approach and offer timely support to at-risk borrowers, even if the customers haven't directly informed them of their struggles.

YOUR PROPERTY MAY BE REPOSSESSED IF YOU DO NOT KEEP UP REPAYMENTS ON YOUR MORTGAGE OR ANY OTHER DEBT SECURED ON IT.