While we have gotten used to everything rising — like interest rates and cost of living costs — it seems like the housing market might buck the trend over the next two years. According to the Office for Budget Responsibility (OBR), the government’s official forecaster, UK house prices are actually forecasted to fall throughout 2023 and 2024 before they are expected to rise again.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.
OBR has said that they expect a drop of 9% over the two-year period, a welcome change for potential homebuyers, first-time buyers, especially, after the recent upward trend of property prices lately. However, how much impact this price drop will have remains to be seen.
Interest rates are still quite high and a squeeze on household finances will limit many would-be homeowners’ ability to save their money toward a deposit. Not only will upfront costs remain high, the overall cost of a mortgage is also likely to stay higher — higher than many people were used to before the coronavirus hit, anyway. At the moment, the average interest rate for a two or five-year fixed rate deal is just over 6%, quite a leap from even a few short years ago.
Why would prices decline?
The combination of a distressed economy from inflation and cost of living increases, a rise in unemployment, and higher mortgage rates will most likely cause property prices to fall. This year, property prices have been forecasted to increase by 10.7%, however experts warn that the tide will turn shortly and house prices will fall by 1.2% in 2023 and 5.7% in 2024.
After that, property prices will likely go up at a rate quicker than income will rise — up by 1.2% in 2025, 3% in 2026, and 3.5% in 2027.
Of course, these projections are simply that — projections — and are subject to change depending on the performance of the wider economy and other factors that were considered as part of the forecast. The UK housing market as well is actually comprised of a series of local markets and there really is no way to tell how certain areas will perform or how much they will be impacted.
What could this mean for you?
Will declining house prices make a difference to you? If you’re in the market for a home but you’re not sure what this news means for your plans, get in contact with the experts at Dental & Medical Financial Services. We’ll advise you on the best path forward and help you every step of the way.