Mortgage Competition Intensifies As Property Collapse Fears Grow

Published / Last Updated on 15/09/2023

We know that interest rates have increased dramatically since lockdown and have continually increased since December 2021.  Bank of England rates were at 0.1% pa in November 2021 and 22 months later are now at 5.25% pa and likely to increase next week to 5.5% pa.

These increases pushed the average mortgage rate up from between 2-3% in 2021, hitting over 6% per annum is 2023.  This means that costs of borrowing for many people have doubled in less than 2 years.  The results as we know:

  • Mortgages for homeowners are much larger.
  • Landlords with buy to let mortgages are under immense pressure with mortgages increasing on top of increased taxation, increased stamp duty, fire safety improvement costs and energy performance and efficiency costs by 2025 (new tenants) and 2028 (existing tenants) in addition to even more protection and rights for tenants under the Renters Bill now going through Parliament.
  • New buyers are choosing to postpone buying and rent until rates come down given that in many cases it is cheaper to rent.
  • Demand for rentals is up and rents are increasing.
  • Demand and affordability for buying property has fallen meaning prices are falling at there fastest rates for nearly 16 years.
  • Mortgage arrears have increased by 1/3rd in just 1 year to £16.9bn (highest since 2016) putting pressure on both borrowers and lenders alike.


Many are forecasting a property market crash at a level not seen before but with banks flush with cash as people are saving more with higher savings rates, they are starting to cut mortgage rates to use the surplus deposits:

  • In anticipation of Bank of England interest rates soon to hit their peak before then starting to fall back.
  • To avoid further arrears and repossessions on existing borrowers.
  • To encourage more borrowers to the market.
  • This will also slowdown property price falls meaning lenders are more stable in terms of equity in properties and less exposed to toxic debt.

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