Britain’s house price crash ‘will be the worst in the world’ The UK is expected to have the longest house price downturn in the Western world as a shock rise in official interest rates hammers the mortgage market. Property values across Britain will keep falling until the second half of 2025, Oxford Economics predicted. Prices are forecast to plunge by 11pc compared with their peak in 2022, the consultancy said. By contrast, in other Western countries – including America, France, Germany and Italy – prices are expected to start rising again this year and throughout 2024. Liam Bailey, global head of research at Knight Frank estate agents, said a gloomier outlook for interest rates is leading to increasing “forecasts for decline”. British house prices had been previously expected to recover early next year, but this was before interest rates were projected to hit 6pc by the end of 2023. The Bank Rate jumped from 4.5pc to 5pc earlier this week following worse-than-expected inflation data over the past five weeks. Inflation remained flat at 8.7pc in May, confounding predictions of a drop to 8.4pc. The headline figure was pushed up by rising core inflation, which strips out volatile measures like food and energy prices. It climbed from 6.8pc to 7.1pc. Wage increases have also fuelled higher forecasts for interest rates. Pay increased by 7.2pc in the past year, according to the Office for National Statistics, which is feeding into price rises by giving consumers more money to spend. Markets are now forecasting the Bank Rate peaks at a higher level and stays elevated for longer. As a result, the rate on both variable and fixed-term mortgages have shot up as a consequence. Mr Bailey said: “This is going to be a longer term issue for the UK housing market.” In the US, where house prices are only expected to drop by 5pc, according to Oxford Economics, inflation has dropped at a much faster rate and now sits at 4pc. Interest rates will be able to come down sooner there than in the UK. Britain has the highest inflation rate among the G7 group of economies and inflation is set to remain above the Bank’s 2pc target for three years, according to forecasts from Goldman Sachs. Max Mosley, an economist at the National Institute of Economic and Social Research, said prolonged inflation will also eat into the amount of money households will have to spend on properties, applying downward pressure on house prices for longer. Src: https://uk.yahoo.com/finance/news/britain-house-price-crash-worst-050000235.html

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Britain’s house price crash ‘will be the worst in the world’

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Britain’s house price crash ‘will be the worst in the world’

The UK is expected to have the longest house price downturn in the Western world as a shock rise in official interest rates hammers the mortgage market.

Property values across Britain will keep falling until the second half of 2025, Oxford Economics predicted.

Prices are forecast to plunge by 11pc compared with their peak in 2022, the consultancy said.

By contrast, in other Western countries – including America, France, Germany and Italy – prices are expected to start rising again this year and throughout 2024.

Liam Bailey, global head of research at Knight Frank estate agents, said a gloomier outlook for interest rates is leading to increasing “forecasts for decline”.

British house prices had been previously expected to recover early next year, but this was before interest rates were projected to hit 6pc by the end of 2023.

The Bank Rate jumped from 4.5pc to 5pc earlier this week following worse-than-expected inflation data over the past five weeks.

Inflation remained flat at 8.7pc in May, confounding predictions of a drop to 8.4pc. The headline figure was pushed up by rising core inflation, which strips out volatile measures like food and energy prices. It climbed from 6.8pc to 7.1pc.

Wage increases have also fuelled higher forecasts for interest rates. Pay increased by 7.2pc in the past year, according to the Office for National Statistics, which is feeding into price rises by giving consumers more money to spend.

Markets are now forecasting the Bank Rate peaks at a higher level and stays elevated for longer. As a result, the rate on both variable and fixed-term mortgages have shot up as a consequence.

Mr Bailey said: “This is going to be a longer term issue for the UK housing market.”

In the US, where house prices are only expected to drop by 5pc, according to Oxford Economics, inflation has dropped at a much faster rate and now sits at 4pc.

Interest rates will be able to come down sooner there than in the UK. Britain has the highest inflation rate among the G7 group of economies and inflation is set to remain above the Bank’s 2pc target for three years, according to forecasts from Goldman Sachs.

Max Mosley, an economist at the National Institute of Economic and Social Research, said prolonged inflation will also eat into the amount of money households will have to spend on properties, applying downward pressure on house prices for longer.

Src: https://uk.yahoo.com/finance/news/britain-house-price-crash-worst-050000235.html