Here’s what happened in the property market in 2022 and how it’ll affect this year

Published: January 4, 2023 by Jennifer Armstrong

The economic challenges of 2022 affected the property market, from rising interest rates to reluctant buyers causing demand to fall. Here’s what happened in the property market last year, and how it could affect you in 2023. 

Interest rates soared and pushed up mortgage repayments

If you have a mortgage, rising interest rates are likely to have been on your mind last year.

To tackle rising inflation, which reached a 40-year high in 2022, the Bank of England (BoE) increased interest rates several times during the year. At the start of 2022, the base rate was 0.25% and had increased to 3.5% by the end of the year.

A rise of 3.25% may not seem like a lot. However, as a mortgage is likely to be the largest loan you take out, it can have a huge effect on your repayments and the total cost of borrowing. If you have a variable- or tracker-rate mortgage, it’s likely your repayments have already increased. 

The BoE expects inflation to remain high in the first half of 2023. So, mortgage holders should be prepared for further rises in the coming months.

If your mortgage deal is coming to an end, a mortgage broker can help you assess your options and understand your potential outgoings. 

Property prices started to stagnate at the end of the year

While property prices have increased year-on-year, there were signs that the market was stagnating towards the end of the year.

According to the Halifax House Price Index, the average property price in November 2022 was 4.7% higher than it was a year earlier at a little over £285,500. However, when compared to October, the price had fallen by 2.3%. 

Looking ahead, some experts predict that property prices will fall by around 10% between 2023 and 2024. 

There were fewer mortgages to choose from when compared to 2021

As mortgage lenders reacted to the news that property prices were likely to fall, it’s not surprising that homeowners found they had less choice when searching for a mortgage. 

According to a report in Mortgage Strategy, there were 41% fewer mortgage deals in November when compared to a year earlier. 

While there are fewer mortgages, there are still lots of options and it can be overwhelming or difficult to understand which one meets your needs. As a mortgage broker, we can help you identify which mortgage could be right for you. 

The number of mortgage approvals suggests demand for property is falling

Economic uncertainty is affecting the demand for property and it is playing a role in falling property prices. 

Statistics from the BoE suggest that the number of mortgage approvals for house purchases “decreased significantly” in September. The number of approvals for remortgaging also fell. 

The findings suggest that demand for property was already falling in September as potential buyers worried about increasing their borrowing amid the cost of living crisis.

It could also indicate that mortgage providers are being cautious about lending due to economic circumstances. 

If you’re hoping to sell your property in the coming months, you may find that it’s more difficult to find a buyer.

The BoE relaxed mortgage stress-tests 

Perhaps surprisingly, given the rising interest rate, the BoE relaxed the stress-tests that lenders must perform when reviewing a mortgage application in 2022. 

Rules brought in following the 2008 financial crisis meant that lenders had to carry out stringent affordability tests. The change meant buyers could potentially borrow more and that some lenders could be more flexible. For example, they may consider how a potential buyer has reliably paid rent when reviewing their application.

However, lenders still have a duty of care and will continue to assess how much risk each application poses, especially in the current climate of rising interest rates. While the relaxed tests could be good news for you, it’s just as important that you’re confident in your ability to meet repayments. 

Thousands of homebuyers will benefit from a Stamp Duty cut

The threshold for paying Stamp Duty has increased until 2025. If you’re hoping to buy a property before then, it could save you thousands of pounds.

If you’re buying a home, you won’t need to pay Stamp Duty on the first £250,000 of the property after the threshold was increased. For first-time buyers, the threshold has increased to £425,000.

It’s hoped that the reduction in Stamp Duty will encourage people to buy despite the current challenges. 

Contact us about your property and mortgage plans for 2023 

If you’ll be searching for a new mortgage this year, please contact us. We’ll help you understand your options and which deal could be right for you.

Please note:

This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.


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