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House prices to fall 10% by end of 2023

The news has been filled with financial predictions for days, following this week’s government Spring 2023 Budget announcement. Many people have been speculating as to how mortgages and house prices will be impacted, and the Office for Budget Responsibility has now weighed in.

This department has made several predictions about the UK housing market, and we will explain the main points for you here.

In this section (Base rate to increase and house prices drop by end of year):

House prices decrease another 10% by end of 2023

The Office for Budget Responsibility or ‘OBR’ has stated they believe house prices will continue to fall moving into Autumn 2023. UK house prices have already fallen significantly over the last 6 months, with a drop of 1.1% since February 2023. The amount of property sales is also expected to decrease, with this figure predicted as a 20% drop.

The house price fall will be a further drop of around 10%, which is not ideal news for any homeowners who had thought about selling soon. It is believed by experts that house prices should start to rise again by 2026.

Buyers may be able to benefit, so anyone considering a purchase over the next couple of years will likely be able to take advantage of lower pricing. This could be very helpful for people with a lower budget, such as those on a lower income or first time buyers.

Bank of England base rate set to rise again

Inflation has spiralled over the last year, due to rising wholesale and import costs of essentials such as energy, gas, food and more. This has contributed to a growing cost of living crisis in this country and resulted in several rises to the Bank of England’s base interest rate, the latest of which set the rate to 4%.

This rate has a big impact on the interest charged for any credit agreement such as credit cards, car finance, loans and of course mortgages. Lenders use this rate to adjust their variable rate and tracker mortgages, meaning any change the Bank of England makes is likely to affect your monthly repayments.

The Office for Budget Responsibility predicts that long term the rate will level out around 3%. In the shorter term, this rate will rise to high of about 4.3% by the end of 2023 before decreasing again. This is because inflation is also expected to lower drastically, dropping from highs of 10.7% down to 2.9% by the end of the year.

Learn more about the link between the Bank of England base rate and how much you pay for interest on your mortgage.

Mortgage rates will stay above 4% until at least 2027

The average interest rate for a mortgage rate should level out at around 4.2% by 2027 according to the Office for Budget Responsibility.

Many lenders currently charge a far higher rate of interest than this (some including HSBC charge as much as 6.99% for their Standard Variable Rate). 4.2% would be a significant saving in interest compared to this, but is still more than double the average mortgage rate at the end of 2021.

Should I review my mortgage?

We always advise reviewing your mortgage regularly, to make sure you are not paying more than you should be. Our mortgage EXPERTS can offer FREE advice, assessing your current mortgage and those currently available to make sure you have the best possible deal in place.

If there is a lender or mortgage better suited to your needs, we can help you through the process of switching your deal with expert guidance and support throughout.

Useful resources

Office for National Statistics – How increases in housing costs impact households

Bank of England – Interest rates and Bank rate

Gov.uk – UK House Price Index: reports

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