We think it will take longer than most others expect for rising interest rates to bring down the curtain on the COVID-19 house price boom. A large stock of household savings, the ongoing adjustment to home working and very limited stock on the market will conspire to drive house prices up by a further 5% in 2022, much more than the consensus expectation of a 2% gain. But rising interest rates will cool house price growth and transactions come the second half of 2022 and in 2023. However, with the labour market in good shape, Bank Rate would have to rise to over 2% for the housing market to get into correction territory, which neither we nor investors anticipate.
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