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Mortgage interest rate predictions UK 2023

Consistent interest rate increases have been a huge blow to the UK mortgage market, with the prospect of high repayments putting off many aspiring buyers.

Interest rates will always have a big impact on how much your monthly mortgage repayments will be, so it is important to keep yourself well informed. Our skilled mortgage experts have put together some key predictions about interest rates this year and how your monthly mortgage payments could be affected.

In this blog, we will explain more about how UK interest rates are decided and why this could lead to you paying more (or less) for your mortgage in the future.

Mortgage interest rates UK predictions 

With the Monetary Policy Committee (or MPC) voting to increase interest rates 11 times in a row, another rise seems very likely. The rate increased from 4% to 4.25% in March 2023, following months of economic instability caused by last years Autumn mini budget. 

It had been hoped that a fall in inflation would lead to lower interest rates in the UK – but this fall didn’t happen. Though inflation is very high it is lower now than last (it hits the highest level in 41 years back in October at 11.1%). As well as rising inflation, other factors could also cause interest rates to continue increasing, including rising unemployment and an increase in wages (national minimum wage was increased earlier this month). 

Though UK inflation did decrease slightly, it still sits at the high level of 10.1%. Generally, for the UK to have a stable economy with good growth, the rate of inflation needs to sit at around 2%. 

With a rate 8.1% higher, the Bank of England’s main way to keep the economy stable is to continue increasing interest rates. At the very least, rates are unlikely to drop from current levels much if at all for a while. 

The Bank of England rate has a direct effect on tracker mortgages and will usually cause increases in repayment costs for other variable rate mortgages too. Economic experts believe that interest rates will peak at around 5% by August 2023, meaning it could be worth budgeting a little more for your mortgage repayments this summer. 

The MPC meet around every 6 weeks (8 times per year) to vote, and their next vote is scheduled for 11th May 2023. Any changes made should come into place shortly after this. 

More information – BoE announce 11th interest rate rise 

How will UK interest rates predictions affect my mortgage? 

Whether you end up paying more due to interest rate rises will be decided by which type of mortgage you have. 

If you have a fixed rate mortgage deal, your interest rate is set for an agreed number of years. If you are not nearing the end of your fixed rate deal, you shouldn’t need to worry about higher mortgage rates yet.

Anyone with a variable rate mortgage may see a rise in costs but this will come down to what lender they are with. Lenders are allowed to adjust their standard variable rates at their own discretion. They may choose to increase rates if the Bank of England raise theirs, but they don’t have to. 

It will people with a tracker rate mortgage who will be most directly affected by any Bank of England interest rate changes. The interest charged on tracker rate mortgages tracks the Bank of England rate and changes each time it does. 




Should I fix my mortgage based on predicted UK interest rates?

Switching to a fixed rate deal can be a good option if you are worried about your variable rate mortgage payments increasing. There is a range of fixed rate mortgages available with lenders adjusting mortgage offerings consistently to appeal to new borrowers.

With the help of an experienced mortgage broker, you could save hundreds of pounds per month on your mortgage – and avoid mortgage rate increases for the next few years. With the UK deep into a cost of living crisis, having set monthly repayments and the ability to budget could be a great help.

Remortgaging to a new deal can also be helpful for various other reasons including:

Be aware you could face early repayment charges for exiting your mortgage early. This is when it can be most useful to speak to a mortgage specialist for advice about your best next steps. Our highly qualified mortgage experts can compare rates and deals from OVER 50 TOP UK MORTGAGE LENDERS. This includes great mortgage deals with no exit fees attached in case you need to switch again in the future.


Useful resources

Bank of England – Official Bank Rate history

Bank of England – Statistics

Bank of England – Monetary Policy Committee dates for 2023 and 2024