Are mortgage rates set to drop again in late 2023?

Sep 7, 2023

Everyone is talking about mortgage rates again: Will They Drop in Late 2023?

We asked our Advising Director and mortgage expert Steven Morris

Well the UK housing market has certainly been on a bit of roller coaster so far in 2023. House prices rose rapidly in line with inflation and the cost of living, and mortgage rates followed suit. It became almost untenable for people to buy homes, especially for first time buyers. Things looked rough for the housing market and home-buyers alike.

Then in August came the news that everyone had been waiting for and some of the biggest lenders on the market started to drop their rates. We all collectively breathed a sigh of (partial) relief! 

There may be even better news on the horizon however, as experts say there are some strong signs that mortgage rates could drop even further in late 2023. Huzzah!

Our Advising Director Steven Morris was recently interviewed by The Evening Standard and has this to say:

Will mortgage rates drop further in 2023? 

“Whilst the Lloyds Banking Group only repriced last week, it is only a matter of time before their sub-divisions such as Halifax do so again to keep up with the Joneses”.

As consumers we have seen these types of price wars before, such as when supermarkets drop the prices of petrol and diesel fuels causing other providers to drop their prices to keep pace with the competition. The better the competition in the market, the better it will be for consumers.


So what is the outlook for mortgage rates in 2023?

Any predictions around the future of mortgage interest rates need to be taken with a large pinch of salt, particularly this year, where the economic outlook has shifted gears and directions more frequently than anyone would have expected. For any prediction, mortgage brokers typically look to the trend in ‘swap rates’ which are the guideline rates that lenders base their fixed rate pricing upon. These have continued to come down in recent months. Most notably for the first time in a long time, we are seeing reductions in the cost of 2 year swap rates, not just the 3, 5 and 10 year swap rates.

Perhaps this is an indicator that the market expects the economy to improve even within 2 years, instead of after two years.

Lenders own borrowing costs are nudging down slowly but surely and we see continued mortgage rate cuts. Some mortgage rates have even reduced down to nearly 5% on fixed rates, which we haven’t seen in quite a long time (such as Nationwide’s 10 year fix at 5.04%).

Perhaps this is a sign of a summer/school holiday lull in mortgage lending and lenders offering deals to bump back up customers coming through the doors, nonetheless these changes are very much welcome and, all being well, seem set to continue (slowly!)

In the most recent reports by KPMG and PWC both indicate that the UK is likely to avoid recession.

“The UK economy will likely escape a recession. That’s thanks to a better outlook for energy prices, a more resilient global environment, and continued tightness in the labour market.

We expect growth to remain weak though, with real GDP at just 0.3% in 2023, rising to 1.1% in 2024. The risks are skewed to the downside.

Inflation continues to fall from its peak. But it’s doing so at a slower pace than implied by movements in energy prices. We’re forecasting headline inflation to moderate to 5% by 2023 Q4, averaging 7.7% in 2023 and 2.9% in 2024.

The labour market has stayed remarkably resilient, but hiring is now easing. While headline indicators could give an impression of a historically tight labour market, they may also reflect more widespread remote working. Our forecast is for an unemployment rate of 4.1% in 2023 and 4.5% in 2024.

Read our UK Economic Update for June 2023 for our full forecast.”*



Steven Morris – Advising Director



Steve loves a complex mortgage. Most recently he has used his technical geekery to work his way up through Which? Mortgage Advisers, progressing to Senior Adviser and then Onboarding Manager. There, he was responsible for hiring, training and managing new advisers.

He also ran the monthly new starter inductions and wrote and maintained the telephony advice standards of the company. Outside of work Steve can be found coaching and being run ragged by his local under 10’s rugby team, Bristol Harlequins RFC.

Meet the rest of the Advantage Team

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