Mortgage decisions in 2023 required more than finding the lowest advertised rate.
Borrowers faced higher funding costs, changing lender criteria and greater pressure on household budgets. Products could also be repriced or withdrawn quickly.
The central question was therefore not simply whether rates might rise or fall. It was whether a mortgage remained suitable, affordable and workable over time.
At a Glance
The UK mortgage market in 2023 was shaped by higher interest rates and tighter household finances.
Borrowers needed to consider:
- Their deposit and loan-to-value
- Monthly payments and product fees
- Lender affordability assessments
- Fixed, tracker and variable-rate differences
- The cost of waiting for a lower rate
- Their expected time in the property
- The evidence needed for an application
A lower headline rate did not always produce the lowest total cost. Preparation, timing and product suitability were equally important.
What was happening in the mortgage market during 2023?
Mortgage pricing changed significantly between late 2022 and 2023.
The Bank of England increased Bank Rate as it responded to high inflation. In May 2023, Bank Rate reached 4.5%.
A higher bank rate did not automatically result in an identical increase across all mortgage products. Fixed mortgage pricing was also affected by wholesale funding costs, swap rates and lender demand.
The Bank of England reported 50,500 mortgage approvals for house purchases during May 2023. This was up from 49,000 in April.
Remortgage approvals also increased from 32,500 to 33,600. Meanwhile, the effective interest rate on newly drawn mortgages reached 4.56%.
These figures showed that people were still buying and refinancing. However, the financial calculations had become less forgiving.
Borrowers could no longer judge affordability using property price alone. The mortgage rate, term, deposit and household expenditure all carried greater weight.
Why mortgage rates were only part of the decision
A mortgage rate affects monthly payments, but it does not show the complete cost.
Two products with similar rates may include different:
- Arrangement fees
- Valuation charges
- Cashback incentives
- Legal services
- Early repayment charges
- Product transfer conditions
- Reversion rates
For example, a product with a lower rate may include a large arrangement fee. That fee can reduce or remove the apparent saving, particularly on a smaller mortgage.
Borrowers therefore needed to compare the cost over the intended product period.
A five-year fixed mortgage should not automatically be compared with a two-year fix using monthly payments alone. The comparison should also consider fees, likely moving plans and future refinancing costs.
Our mortgage calculator can provide an initial repayment estimate. It does not replace a lender’s affordability assessment or a personalised recommendation.
How loan-to-value affected mortgage options
Loan-to-value, known as LTV, compares the mortgage with the property’s value.
A £180,000 mortgage on a £200,000 property represents 90% LTV. The borrower contributes the remaining 10% as a deposit.
LTV mattered because lenders commonly grouped products into bands. These could include:
- 95% LTV
- 90% LTV
- 85% LTV
- 80% LTV
- 75% LTV
- 60% LTV
Moving into a lower LTV band could improve product choice. However, buyers also needed funds for legal fees, surveys, moving costs and possible repairs.
Using every available pound for the deposit could leave the household without an emergency reserve.
A larger deposit could help, but it was not the only factor. Income, credit history, expenditure and property type could still affect the lender’s decision.
How lenders assessed mortgage affordability
Mortgage affordability was not based on salary alone.
Lenders could examine:
- Basic employment income
- Overtime, bonuses or commission
- Self-employed earnings
- Credit commitments
- Childcare costs
- Maintenance payments
- Household expenditure
- Dependants
- Mortgage term
- Retirement age
- Credit history
Each lender applied its own criteria. Two lenders could therefore reach different conclusions using the same applicant information.
Some lenders accepted particular income sources more readily than others. Treatment of overtime, contractor income or company profits could also differ.
Borrowers could review the wider principles through the mortgage affordability guide.
A calculator could provide an estimate. However, the final figure depended on the lender’s assessment and supporting evidence.
What was a Decision in Principle?
A Decision in Principle was an early indication of how much a lender might consider.
It could also be called an Agreement in Principle or Mortgage in Principle.
The lender usually reviewed basic information about:
- Income
- Outgoings
- Deposit
- Credit commitments
- Residential history
- Requested borrowing
Some lenders used a soft credit search. Others could use a hard search. Applicants needed to understand which approach applied before proceeding.
A Decision in Principle was not a mortgage offer. It remained subject to full underwriting, evidence, valuation and property acceptability.
It could still help buyers understand a possible budget before viewing homes.
The full mortgage approval process explains how an initial decision differs from underwriting and a formal offer.
Fixed, tracker and variable mortgages in 2023
Different mortgage structures placed different risks on the borrower.
Fixed-rate mortgage
A fixed-rate mortgage kept the interest rate unchanged for an agreed period.
This gave payment certainty during the fixed term. However, early repayment charges could apply when leaving the product early.
A fixed rate could suit borrowers who valued predictable payments. It did not guarantee the lowest future cost.
Tracker mortgage
A tracker mortgage usually followed Bank Rate plus an agreed margin.
Payments could rise or fall when Bank Rate changed. Some trackers offered greater flexibility, although individual conditions varied.
Trackers could appeal to borrowers willing to accept changing payments. They required enough financial capacity to manage possible increases.
Standard variable rate
A lender’s standard variable rate was set by that lender.
It could change without moving directly alongside Bank Rate. Borrowers often moved onto this rate when an initial deal ended.
Standard variable rates sometimes offered flexibility. However, they could be more expensive than available fixed or tracker products.
Borrowers approaching the end of an existing deal could review their remortgage options before the current rate expired.
Was waiting for mortgage rates to fall a reliable strategy?
Waiting could produce a lower rate, but it could also create other costs.
During the waiting period:
- Property prices could change
- The chosen home could be sold
- Rent could continue
- Lender criteria could tighten
- The applicant’s circumstances could change
- Mortgage products could be withdrawn
- The required deposit could increase
Nobody could know the future path of mortgage pricing with certainty.
A practical decision therefore needed to start with the borrower’s own position.
The relevant questions included:
- Is the mortgage affordable now?
- Is the property suitable for the expected holding period?
- Is there enough money after completion?
- Could repayments remain manageable if circumstances changed?
- Would delaying improve the overall position?
The right time to buy was not determined by one national statistic. It depended on the relationship between the market and the household.
How first-time buyers could prepare
First-time buyers often faced the combined pressure of deposit saving, rent and changing rates.
Preparation could reduce avoidable delays.
Useful steps included:
- Checking credit reports for incorrect information
- Avoiding unnecessary credit applications
- Gathering payslips and bank statements
- Confirming the source of the deposit
- Reviewing committed monthly expenditure
- Estimating legal and moving costs
- Understanding the likely LTV band
- Obtaining a Decision in Principle where appropriate
Our first-time buyer mortgage guide explains the wider buying process.
Applicants with previous payment problems could also review how lenders may assess an adverse credit mortgage application.
What remortgage borrowers needed to consider
Borrowers with a fixed deal ending during 2023 faced a different calculation.
Many were moving from lower historic rates into a more expensive market. The difference could materially affect monthly expenditure.
A remortgage review needed to consider:
- The current mortgage balance
- Remaining mortgage term
- Current property value
- Existing early repayment charges
- Product transfer options
- New lender fees
- Legal and valuation requirements
- Changes to income or credit history
Starting early could provide more time to examine available routes.
However, a product should not be reserved on the assumption that it could always be replaced without consequence. Lender conditions and application costs varied.
Borrowers considering later-life options could also read the broader mortgage options guide. Suitability depends on age, income, objectives and the selected mortgage type.
How a mortgage broker could support the comparison
A mortgage broker could compare products and lender criteria against the borrower’s circumstances.
The work involved more than searching for a rate.
A broker could assess:
- Whether the lender accepted the applicant’s income
- How affordability was calculated
- Whether the property met lending criteria
- The total product cost
- Applicable fees
- Early repayment conditions
- Likely evidence requirements
- Application risks
Connect Mortgages is a credit broker and not a lender. We assess individual circumstances before recommending a suitable mortgage from the lenders available to us.
A recommendation cannot remove market uncertainty. It can, however, make the decision more structured and evidence-based.
A clearer way to make a mortgage decision
The 2023 mortgage market showed why a financial decision should not depend on one number.
A rate mattered. Yet affordability, fees, evidence, flexibility and timing also shaped the outcome.
Markets constantly change. A sound mortgage decision begins with what remains measurable: income, expenditure, deposit, objectives and financial resilience.
Borrowers who understood those factors were better placed to compare the available choices.
Speak to a mortgage adviser to discuss your circumstances and the mortgage options available to you.
Frequently asked questions
Was 2023 a bad time to get a mortgage?
Not necessarily.
Rates were higher than many borrowers had experienced during previous years. However, mortgage approvals continued, and lenders remained active.
Suitability depended on affordability, deposit, property plans and the chosen product.
Did Bank Rate determine every mortgage rate?
No.
Bank Rate influenced borrowing conditions, but fixed mortgage rates were also affected by swap rates, funding costs and lender strategy.
Was the mortgage with the lowest rate always cheapest?
No.
Fees, incentives, mortgage size and the intended product period could change the overall cost.
Did a Decision in Principle guarantee approval?
No.
It was an initial indication only. Full approval remained subject to underwriting, evidence, valuation and the lender’s criteria.
Could borrowers reserve a mortgage before they needed it?
Some lenders allowed applications or product reservations before an existing deal ended.
The available period and conditions differed between lenders. Applicants also needed to consider fees, expiry dates and possible changes in circumstances.
Your home may be repossessed if you do not keep up repayments on your mortgage.
