What has happened since the UK Government's mini-budget in 2022?

On the first anniversary of the UK Government's notable "mini-budget", we had an insightful discussion with our esteemed senior broker, Ian Angus-Felton, who shared his perspectives on the matter.

How has the 2022 mini-budget impacted the mortgage market?

The mini-budget's aftermath brought uncertainty, inevitably leading to several lenders withdrawing and repricing their fixed-rate mortgages in the market. This immediate reaction caused a significant surge in the cost of fixed-rate deals. In particular, it was noted that the average rates for two and five-year fixed mortgages continued on an upward trajectory. The zenith of this increase coincided with 20th October, a notably tumultuous day in politics, marked by the resignation of Prime Minister Liz Truss.

Since then, the mini-budget has continued to bring changes to the mortgage market, and a principal impact has been on the affordability of mortgages, as the budget included measures that affect the broader economic environment.

How has the mortgage market responded to the changes brought about by the 2022 mini-budget?

The mortgage market in the UK has experienced significant changes in response to the 2022 mini-budget. According to research published by the Office for National Statistics (ONS), an estimated 1.4 million people are anticipated to face interest rate increases this year as their fixed-rate mortgage deals expire.

Many of these borrowers had secured their mortgage deals when the interest rates were below 2%. However, the landscape has changed with the onset of 2023. The average two-year and five-year fixed mortgage rates rose significantly. This substantial increase in interest rates indicates a considerable shift in the mortgage market in response to the 2022 mini-budget, impacting many UK homeowners.

What immediate effects have you noticed in the mortgage market following the 2022 mini-budget?

Following the mini-budget, we have seen an increase in 5-year Fixed Rate mortgage applications, particularly from first-time buyers. This could be due to the uncertainty caused by the increasing interest rates, which have left many customers affordable challenges. Regular monthly payments are more appealing than in the recent past, as changes in personal circumstances mean that some people may find their borrowing capacity affected.

What can customers do to ensure they get the best mortgage products available?

Customers should first ensure they clearly understand their financial situation and what they can comfortably afford. They should consider the mortgage repayments and other costs associated with owning a home, such as insurance, maintenance, and council tax.

They should also engage with a recommended and experienced mortgage broker. A broker can shop around the whole of the market as they have access to a broad range of products, including some exclusive products, and can advise on which ones best suit the customer's needs and circumstances. Lastly, customers should keep an eye on interest rates and any changes in the economic environment that could affect their mortgage and look to change where appropriate from up to 6 months before their current deal ends.

What are your predictions for the mortgage market in the wake of the 2022 mini-budget?

The mortgage market will likely remain competitive, with lenders continuing to offer various products to meet different needs. However, the changes brought about by the mini-budget have led to some tightening in lending criteria, particularly if there are concerns about affordability. Borrowers may also see more regular changes in interest rates, both due to macroeconomic factors and changes in lenders' risk appetites. We have been pleased to see rates reducing slightly in the current period; however, things are unlikely to return sometime soon to the low-interest rate levels seen before the 2022 mini-budget. As always, the future is uncertain, and borrowers should stay informed and seek professional advice when making mortgage decisions.

Don't hesitate to contact our friendly brokers if you wish to discuss your situation.