House prices to fall by 10 per cent over next two years over persistently high inflation
For sale signs outside a block of flats
PA
UK house prices will likely fall by 10 per cent over the next two years, a credit ratings agency has warned.
Credit ratings agency Moody’s suggested high inflation and an increase in lending rates will have a direct impact on the housing market.
The economic situation will “trigger a correction” to property prices.
Moody's Investor Service said in a report: “Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK (Aa3 negative) housing market.”
UK house prices will likely fall by 10 per cent over the next two years, a credit ratings agency has warned
PAUK inflation stood at 8.7 per cent in April as the data poured damp water on expectations of a more profound price decrease.
CPI was registered at a whopping 10.1 per cent in March.
Recent inflation data sparked a surge in market interest rates.
Investors were left scrambling to price in more increases in borrowing costs ahead of an expected hike from the Bank of England.
Mortgage rates risk rising after the latest inflation figuresPAMoody’s also warned that a larger decline in house prices of around 21 per cent could have profound ramifications for the UK economy.
The report claimed: “The UK sovereign would enter a recession in the second half of 2023, lasting for six quarters.
“Unemployment would reach six per cent by end 2024, still below its peak in the global financial crisis.”
It has been a turbulent few months for the housing market after ex-Prime Minister Liz Truss and former Chancellor Kwasi Kwarteng delivered their mini-Budget last autumn.
Britain's housing market had shown a recovery in early 2023 after a sharp rise in mortgage rates at the end of last year following former Prime Minister Liz Truss's economic agendaPAThe mini-Budget resulted in a surge in mortgage rates.
However, many economists expect a fall in house prices this year as the central bank’s interest rate hikes filter through into higher mortgage costs.
House price indexes produced by Halifax and Nationwide suggested there had been year-on-year declines for the first time since 2012.
Economists and property analysts fear house prices could fall by three per cent this year before flatlining in 2024, a Reuters poll published last week has warned.