The Mortgage Broker Landscape In 2023: What’s Next In Store?
If you are planning to purchase a property, it is advisable to do so with the help of a mortgage broker. Mortgage brokers help you scan the market and bring the deals that best suit your circumstances. This helps you make important decisions regarding the mortgage you should take and the lender you should work with. If you want to switch from one deal to another, a good remortgage broker will guide you along the way.
We all know that the mortgage market in 2022 (especially towards the end of the year) was nothing less than a rollercoaster for borrowers and brokers. While it is a common belief that the crisis was due to the increase in interest rates, it has more to do with the mini-budget announced in mid-September.
This mini-budget comprised over-promised and under-funded tax cuts, almost all of which were eventually reversed. This led to an unfortunate market crisis, forcing lenders to pull their deals and price their replacement at almost 1.5% higher rates.
However, the markets seem more settled as we enter 2023, with the price of two-year and five-year fixed mortgaged being below the October peak of 6.5%. Experts predict bank rates to peak at 4.5% in 2023, which is still less than the feared 6% expected earlier.
To understand the ongoing mortgage broker landscape in 2023, it is important to consider the following major factors:
The impact of inflation
One of the biggest reasons behind a fall in the bank rates is because of inflation, which is currently at an all-time high of 10.7%. This rate is expected to fall significantly in 2023. Having said that, experts suggest that the rate will still remain above the Government’s target of 2% until mid-2025.
So, how does this affect the mortgage broker landscape in 2023?
According to Alice Haine, a Personal Finance Analyst at Best Invest, the interest rates are now expected to peak at comparatively lower levels. Due to this, the mortgage rates (especially on new mortgage deals) are less likely to spike as they did earlier because the increase in the rates is already priced in.
Alice also expressed her dilemma regarding the choice between fixed and tracker mortgages. In her opinion, it is common for fixed rates to seem less appealing in the current economic climate as they follow the Bank of England’s base rate along with some additions.
However, as the interest rates are still likely to increase, Alice believes that it may lead to a jump in the tracker repayments in the short term. It is advisable to take help from a skilled and experienced mortgage broker before taking any major steps regarding purchasing a property in 2023.
Fixed vs. tracker mortgages
The confusion regarding choosing fixed vs. tracker mortgages also defines the ongoing mortgage broker landscape in the UK. According to experts , borrowers are likely to face a bigger dilemma in 2023 of choosing between fixed and tracker mortgages. As no one knows what will happen with the interest rates, the uncertainty calls for expert advice.
Experts also claims that 2023 will witness more competition in the market, which may improve the range of mortgage options available to borrowers. However, it is important for borrowers to look beyond the interest rates and consider the complete package, including the fees and other relevant costs.
According to another mortgage expert, the fixed mortgage rates are likely to continue decreasing over the upcoming 12 months, i.e., for the remaining of 2023. He says that the increase of these rates was partly due to the assumption that the Bank of England base rate will lead to a massive spike in the mortgage application volume, making it difficult for the lenders to serve their clients. The increase in the rates acted as a preventive measure against the same.
They are hopeful that the fixed mortgage rates can fall down to 4.25% by the end of the first quarter in 2023, provided there isn’t any scenario that mimics the mini-budget of 2022.
Important tips for buying a home in 2023
Now that we have an idea about the mortgage broker landscape in 2023, let’s have a look at a few important tips that will help you buy a home in 2023:
Choose the right mortgage type
Before anything else, it is important to finalize the type of mortgage you are looking for. If you have never purchased a property before, you can go for a first-time buyer mortgage. If you are planning to shift from one property to another, it is advisable to opt for a home mover mortgage. If you are planning to purchase a property just to rent it out, go for a buy-to-let mortgage.
Team up with a skilled mortgage broker
Depending on the type of mortgage you want to have, look for a highly skilled and experienced mortgage broker. These professionals will guide you every step of the way, from choosing the right lender to handling complicated paperwork.
Focus on your savings
Finally, purchasing a house is an expensive activity and uses up a lot of a homebuyer’s savings. Make sure you have saved enough money to pay your deposit and cover all the expenses you’ll be required to incur as you apply for a mortgage. From legal costs to administration fees, make sure you list down all areas where you’ll need to spend your money before going ahead with the decision to purchase a house.
One of the most beneficial ways of reducing your expenses while purchasing your new house is by working with fee-free mortgage brokers. This helps you save enough while obtaining quality mortgage broker services.
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