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Moneyfacts Year in Review 2023 – Mortgages

by | Dec 4, 2023

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Following on from the turbulence of late 2022, some average mortgage rates in 2023 have reached levels not seen since (and in some instances, before) the 2008 global financial crisis.

With significant fluctuation having occurred across interest rates and product availability alike, Moneyfacts offers its analysis of the mortgage market in 2023.

Residential mortgages

The average rate for a two-year residential mortgage peaked at 6.86% on 26 July this year. This will have been a sobering prospect for those coming to the end of a two-year fix, when the average rate was just 2.52% on 26 July 2021.

The last time the average rate was higher than 6.86% (on a first-of-month basis) was August 2008 at 6.94%. Rates for 2022 peaked in the aftermath of the fiscal announcement at 6.65% on 20 October 2022, meaning two-year fixes went considerably higher than those this summer.

Sub-5% two-year fixes available to the whole of the UK disappeared entirely from circulation for several months, finally coming back in November when Nationwide launched a 60% loan-to-value (LTV) product at 4.99%.

Meanwhile five-year fixed average rates did not surpass their highs of late 2022 – which peaked at 6.51% on 20 October 2022. This year they reached 6.37% on 1 and 2 August, but came down to sub-6% by late September. The average rate for a five-year fix on 2 August 2018 was just 2.93%.

The calm before the storm this year was at the start of May, when both two (5.26%) and five-year (4.97%) fixes were at their lowest on a first-of-month basis. 

The first two days of the year saw the lowest mortgage product availability of 2023, with just 3,643 deals available. Despite some turbulence and mass withdrawals at times of high volatility, the market bounced back strongly with almost 5,900 products available in late November. This was the highest number in over 15 years.

Buy-to-let mortgages

The average rate for a two-year fixed Buy-to-let (BTL) mortgage peaked at 6.97% between 24 and 26 July this year. The equivalent average rate as of 26 July 2021 was 2.95%.

The rate of 6.97% was the highest average two-year BTL rate on Moneyfacts’ records, which for this data set go back to October 2011.

A similar story can be told in the five-year fixed BTL market. Five-year fixed BTL rates hit an average of 6.82% between 21 and 25 July, again the highest on Moneyfacts’ records.

As with residential mortgages, BTL product availability has risen significantly since the start of the year. From just 1,906 deals available on 1 and 2 January, over 1,000 more became available by the year’s peak of 2,982 on 20 November.

Standard variable rate

The average standard variable on residential mortgages rate hit 8.19% on 1 November this year and remains at this figure as of 1 December. This first-of-month average is the highest on Moneyfacts’ records, which for this data set go back to July 2007. 

Equity release

The average rate for equity release hit 7.33% on 1 November. On a first-of-month basis, this was the third-highest level on Moneyfacts’ records (going back to November 2007). 

Equity release averages peaked in November 2022, reaching 8.13% having been at 7.54% the previous month.

 Residential – Average two-year fixed rate (%)Residential – Average five-year fixed rate (%)BTL – Average two-year fixed rate (%)BTL – Average five-year fixed rate (%)Residential product availabilityBTL product availability
Jan-235.79%5.63%6.29%6.25%3,6431,906
Feb-235.44%5.20%5.95%5.85%4,3412,246
Mar-235.32%5.00%5.81%5.72%4,3722,400
Apr-235.35%5.05%5.64%5.61%5,1462,628
May-235.26%4.97%5.56%5.52%5,2642,715
Jun-235.49%5.17%5.80%5.76%4,9672,330
Jul-236.39%5.96%6.59%6.43%4,4322,458
Aug-236.85%6.37%6.88%6.72%5,0562,585
Sep-236.70%6.19%6.64%6.49%5,3382,475
Oct-236.47%5.97%6.40%6.32%5,4952,581
Nov-236.29%5.86%6.25%6.17%5,6782,769
Dec-236.04%5.65%6.03%5.98%5,6942,977
2023 Peak6.86 (26 July)6.37% (1-2 August)6.97% (24-26 July)6.82% (21-25 July)5,894 (20-21 November)2,982 (20 November)
Source: Moneyfactscompare.co.uk

James Hyde, Spokesperson at Moneyfactscompare.co.uk, said: “A cocktail of several factors led to mortgage rates rising to recent highs this year.

“Average rates shot up in the aftermath of the 2022 fiscal announcement, but the impact of 14 consecutive base rate rises and stubbornly high inflation ensured the situation remained significant in 2023.

“June’s 0.5% base rate rise, coupled with consistently high inflation, produced dramatic rises in mortgage pricing. For example, the average two-year fixed rate rose from 5.49% on 1 June to 6.39% on 1 July.

“Average fixed rates peaked around a month later, with two-year fixes reaching a high of 6.86% in late July, and five-year equivalents hitting 6.37% in early August.

“While the volatility has calmed in recent months and rates are on a gentle downward trajectory at present, any further rise in base rate or swap rates may lead to a reversal. It remains to be seen where rates will eventually settle, as the Bank of England attempts to bring inflation down to 2% by early 2025.”

We will be distributing ‘Year In Review’ releases for Savings and Personal Finance in the next few working days.

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