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House prices to fall 10% by end of 2023

Following on from this week’s 2023 Spring budget announcement, the Office for Budget Responsibility (OBR) has offered some predictions for how mortgages and house prices will be affected.

We will explain all the key predictions this department has made and how you and your current (or future) mortgage could be impacted by this year’s budget.

In this section (OBR expects house price will fall 10% by end of 2023):

In bad news for the UK property market, there is another decrease to house prices expected which is a fall of around 10%. The Office for Budget Responsibility states the main reason for this is ‘low consumer confidence’ due to the current instability in the housing market and mortgage rates.

House prices have already fallen considerably since their peak in the middle of 2022. House prices dropped following the disastrous impact last year’s Autumn mini budget had on the economy back in October.

Those thinking about selling may want to hold off for the time being, but buyers may be able to benefit from lower property prices over the next few years. This could be helpful for first time buyers in particular, or those with a more limited budget.

Above 4% mortgage rates to continue for the foreseeable future

The interest rates on mortgages are set to stay above 4% on average until at least 2027. The Office for Budget Responsibility expects the rate to peak at around 4.2%.

This rate is far lower than some rates currently on offer e.g. HSBC’s SVR (Standard Variable Rate) of 6.99%. Although 4.2% is a notable decrease from this, it is still much higher than the rate seen in December 2021 (in fact it is almost double).

The Bank of England to increase their base rate again

Any changes made to the Bank of England’s base rate of interest will have a big impact on the price borrowers will pay each month for their mortgage repayments. There have been several increases to this figure over the last 12 months, due to rising inflation in the UK in the aftermath of Brexit and the Covid-19 pandemic.

The base rate currently stands at 4% but is predicted to increase to a high of 4.3% by the end of this year. The rate should however drop again soon afterward (to approx. 3%), following an equivalent fall in the rate of inflation. Inflation is expected to decrease from 10.7% to around 2.9% over the course of this coming year.

We discuss how the Bank of England rate affects mortgage rates in our February 2023 Mortgage Interest Rates Update.

Is now a good time to buy a house?

With property prices at a significant low, it could be a good opportunity to find a property that suits your needs at a bargain price.

Do I need to review my mortgage?

Reviewing your current mortgage is always a good idea, as you may be able to switch to a new deal or lender with better terms or lower prices.

We offer FREE mortgage reviews and qualified advice from a team of top rated brokers with over 20 years of expertise. You could SAVE £2,200 by simply switching your mortgage to a new fixed rate deal. In a cost of living crisis, any saving can make a huge difference to your home, mortgage and finances longer term.

Keep up to date with all the latest mortgage and finance news in our Essential News and Blogs section.

Useful resources

Office for National Statistics – How increases in housing costs impact households

Bank of England – Interest rates and Bank rate

Gov.uk – UK House Price Index: reports

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