As we head further into 2023, the UK property market and mortgage industry have seen significant developments that are worth paying attention to. From a rise in mortgage products available to buyers to the impact of inheritance tax on families, these changes will have an impact on both buyers and sellers in the market. In this article, we will take a closer look at these key updates since the beginning of February 2023.

Rise in Mortgage Products Available

One of the most significant developments in the mortgage industry is the rise in the number of mortgage products available on the market. According to a report by Mortgage Financing Gazette, the total number of mortgage products available on the market has exceeded the 4,000 mark for the first time since August 2022. This increase comes after a dramatic increase in the average shelf life of a mortgage product, which now stands at 28 days, compared to 15 days in January.

Fixed Mortgage Rates Continue to Drop

Along with the rise in mortgage products available, fixed mortgage rates have continued to drop. The average two-year fixed mortgage rate is now at 5.44%, down from 5.79% in January. Meanwhile, the average five-year fixed rate now stands at 5.20%, down from 5.63% in January. Despite this drop in rates, rate competition appears to be more focused on five-year fixed deals. The rate difference between the average two-year fixed and five-year fixed is now the largest margin seen in almost 15 years, according to Moneyfacts finance expert Rachel Springall.

Impact of Inheritance Tax

Recent figures from HM Revenue & Customs (HMRC) have shown that inheritance tax receipts in the UK have increased by 15% in 2023, contributing an additional £0.9 billion compared to the previous year. Private wealth solicitor Stephanie Parish points out that the basic threshold of £325,000 for inheritance tax has remained the same since 2009 and is set to stay the same until at least 2028. Meanwhile, the world has become a more expensive place, which has contributed to the increase in inheritance tax receipts. Parish notes that families can mitigate inheritance tax by making sure their wills are tax-efficient, utilizing all available reliefs upon death, and considering post-death planning, such as variations.

Prime London Real Estate Market

The pandemic-driven real estate boom in prime London may be over, but the very high end of the market is still going strong. Wealthy property buyers in January 2023 purchased 92% more homes at £5 million or more than they did in January 2019 and 43% more than they did at the beginning of last year. These buyers are considered more insulated from the ups and downs of the rest of the market. Furthermore, the number of homes on the market priced at £5 million or more is currently 15% higher than last year, according to Victorstone.

Positive Outlook for UK Economy

Despite the challenges posed by the pandemic and Brexit, there is reason to be optimistic about the UK economy. Leading forecasters have upgraded their GDP growth forecast for the UK economy from a 1% drop to a 0.6% fall. This is due in part to the recent drop in wholesale energy prices, which is said to have benefited energy-intensive industries such as steel. The S&P Global/Cips flash composite purchasing managers' index also shows that British business activity rebounded in February after six months of declining output. Current consumer confidence levels are also at their highest in almost a year, and Chancellor Jeremy Hunt is expected to net a £30 billion windfall after the UK recorded a surprise surplus in January.

Despite the positive outlook, there are headwinds for the UK economy, including rising interest rates and the cost of living crisis.