With interest rates continuing to normalise, mortgage rates will reach 3.6% by 2020. Combined with the fact that prices are already very high, that will offset the effect of accelerating wage growth, and keep house price inflation below 2% each year to 2020. Growth in transactions will also be modest. That said, with prices in London exceptionally high, and signs that homes there are struggling to sell, we expect prices in the capital to fall by 8% over the next two years.
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