Mortgage rates fall along with house prices

(Last Updated: 04/09/2023)
7 min read

Average House Price London (May)


Sales Volume London (March)


Average House Price England & Wales (May)


Sales Volume England & Wales (March)

Key Takeaways for July 2023
  • Bank of England increases base rate to 5.25% for the 14th time in a row
  • Lowest sales volume for March since 2009 (post financial crash)
  • House prices in England & Wales up by 2% on last year
  • House prices in London up by 1%
  • Property Mark report "The supply of new homes up for sale per member branch continued to lessen in June—now at eight per member branch".
  • Mortgage approvals for home buyers down 13% YOY for June 2023

As the Bank of England (BOE) increase the base rate for the 14th time in a row to 5.25% the housing market is struggling with a lack of sellers coming to market. Even with house prices starting to fall month on month and mortgage lenders offering more 2 and 5 year fixed rate deals, this isn't enough to help first time buyers onto the ladder or home movers to upsize.

According to Taylor Wimpey, the proportion of first-time buyers taking out mortgages with a term of more than 36 years nearly quadrupled in the first half of this year. The housebuilder said that customers were taking out longer mortgages to make monthly repayments more affordable. For obvious reasons: to make the monthly mortgage repayments affordable based on their income and spending.

What our survey revealed about homebuyers
Our survey, conducted by YouGov, reveals the top challenges faced homeowners when buying their most recent property, plus the true costs of defects when skipping a home buyers survey.

What are homebuyers looking for?
Three of the England's largest mortgage lenders and several smaller lenders announced cuts to their mortgage interest rates last week. This is on the back of better-than-expected inflation figures which would mean change in market expectations around Base Rate rises. This latest rise is hoped to be the last and which will then allow lenders better visibility to offer more 2 or 5 year fixed deals.

The challenge for buyers is the interest rate being applied to 5 year fixed deals. According to data from Moneyfacts, the average five-year fixed mortgage deal in the UK now has an interest rate of more than six per cent. Paying 6% interest on a 36 year mortgage of £250,000 will mean £1,413.94 in mortgage repayments each month. In contrast, 12 months ago, at 2% interest, the monthly payment would have been just £812.

Will the BOE base rate go any higher?

The Bank of England base rate has been 1% or under since January 2009. Historically, a rate of 5 to 6% was the normal. The average rate from Jan 2009 all the way back to Jan 1995 is 5.3% so some might say that the base rate is coming back to be more in line with what it always was. This dates right back to when bank rates were set; even in 1694 it was 6%.

Whilst interest rates have been so low, mortgage lending has been more affordable. Now that rates are going up we are seeing fewer mortgages and for first time buyers, 36+ year terms may be the only way to make buying affordable.

At SAM Conveyancing we have a lot of first time buyers who've secured mortgage offers based on June rates, who are telling us they must complete before their offer expires because they won't be able to afford the mortgage based on the new interest rates. This creates high pressure within the transaction, especially if the property being bought has issues which could cost them thousands in the future. This will push some buyers into choosing to buy a property they probably shouldn't, rather than pulling out and waiting for a better one. Sadly the heart often overrides the mind; even when we try to rationalise the choice.

I predict the BOE base rate to go up to 6% by October 2023, says Andrew Boast FMAAT

For those holding off in the hope for lower rates, the best advice is to secure the best rate now for a 2 year fixed term. Base rate is going up again and won't drop as quickly as you may think. This has been confirmed by a statement from the Bank of England who said "it would not cut interest rates until there is “solid evidence” that inflation is falling".

Source: Office for National Statistics (ONS)

Sales volume lowest since the 2009 crash


The number of completed property sales for the month of March picked up on on month by 11% but is still down 39% on last year. Whilst many lenders and media outlets state property prices are falling, they still remain 1% up on last year and only a 1% fall month on month. With no volume of fresh property the house prices in the capital will continue to fall only slightly.

Source: House Price Index (HPI)

England & Wales

England and Wales echoes London with an 8% increase in sales volume but a 39% fall year on year. The lack of affordable mortgage products, followed by a fall in available properties and the overall uncertainty in the housing market is going to cause the market to slow down. Buyers will be thinking why get a 6% mortgage rate this year when you can get a 4-5% deal in the Spring.

Source: House Price Index (HPI)

Mortgage approvals rally

Bank of England data shows that mortgage lending to purchase property increased month on month to 54,662 which could be linked to the mortgage lenders offering more 2 to 5 year fixed rate deals. However, this is the lowest number of approvals for June in 10 years and is a fall of 13% year on year.

At SAM Conveyancing we are seeing a considerable fall in buy to let landlords entering the market and with first time buyers being priced out and second home movers sitting tight, the market will slow down over the next 2 to 3 months. The slow down will start to ease from January 2024 onward after the base rate has stayed static for a number of months.

What about the remortgage market?

Remortgages were up month on month by 13% but still falling by 11% year on year. This could be linked to more buyers in 2018-2022 securing longer term mortgages with a low fixed rate, however those exiting these rates may have to sit tight as they won't be able to afford to remortgage.

Source: Bank of England

Housing supply never meets demand

The government have stated for the last 10 years that we need 300,000 new homes to meet with the demand, however as you can see below, the target has never been reached. This inflates house prices because without enough fresh housing stock and with not enough home owners selling the average house price will remain higher; especially for new builds where you pay a premium (just like buying a new car).

Andrew Boast FMAAT MIC
CEO and Author | SAM Conveyancing

August and September will get worse before they get better as mortgage lenders will reduce the number of available fixed rate deals whilst it is predicted the BOE base rate will continue to rise.

The slight bit of good news is that house prices are falling month on month which means for any buyer in this market you could get a property for under what you'd get in a buoyant market; by buoyant I mean a market with more mortgage products. Sadly until there is an increase in the number of properties to buy, then house prices won't fall at any real material level. Certainly not at the rate they have been increasing over the last 15 years.

If you are planning a move then there are opportunities in this market for a bargain however your major issue isn't the seller, it is the mortgage lender and whether they value the property at what you have offered.

Sources: Latest data from - Bank of England, UK House Price Index, ONS and Property Mark (NAEA).

Andrew Boast of Sam Conveyancing
Written by:
Andrew started his career in 2000 working within conveyancing solicitor firms and grew hands-on knowledge of a wide variety of conveyancing challenges and solutions. After helping in excess of 50,000 clients in his career, he uses all this experience within his article writing for SAM, mainstream media and his self published book How to Buy a House Without Killing Anyone.
Caragh Bailey, Digital Marketing Manager
Reviewed by:

Caragh is an excellent writer in her own right as well as an accomplished copy editor for both fiction and non-fiction books, news articles and editorials. She has written extensively for SAM for a variety of conveyancing, survey and mortgage related articles.

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