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Falls in house prices will continue throughout 2023 The slowdown in house price falls in December is little comfort when leading indicators point to further sharp declines. Despite mortgage rates edging lower in recent weeks, we continue to think that …
30th December 2022
The return of inflation for the first time in the inflation-targeting era has led to the biggest jump in Bank Rate and mortgage rates since the late 1980s. (See Chart 1.) The steady downward trend in mortgage rates from 6.5% in 2008 to 1.5% at the end …
19th December 2022
This is part of a series of reports outlining our key macro and market calls for 2023. Click here to view the full series. Property markets rebounded strongly after 2020, in part boosted by favourable structural shifts brought on by the pandemic. But …
15th December 2022
Q3 likely to mark a peak for lending volumes The detailed mortgage lending data for Q3 show that demand was resilient to rising mortgage rates at first. Loan-to-income ratios crept up despite rising financing costs. But with interest rates on new …
13th December 2022
Survey shows prices and activity continuing to fall in November The RICS survey confirmed that there were widespread house price falls in November. Surveyors expect a further drop in prices and slowdown in transactions ahead, in line with our forecasts. …
8th December 2022
Overview – 2023 will be a tough year for the economy as the effects of the previous rises in inflation and previous hikes in interest rates (as well as a future rise from 3.00% now to a peak of 4.50% in early 2023) are felt. Our view that inflation and …
7th December 2022
Sharp drop confirms that house price correction has begun The largest monthly fall in the Halifax house price index since October 2008 confirms that the house price correction that we forecast has begun. While mortgage rates have fallen back somewhat in …
Headline index starts to fall as recession cuts demand As expected, the headline CIPS construction index retreated in November as falling demand outweighed the benefit of easing prices and an increase in the availability of contractors. As the recession …
6th December 2022
Following the Nationwide data showing a larger-than-expected fall in house prices in November, we hosted an online Drop-In on 1 st December to discuss how far prices could fall and what the downturn could mean for transactions and construction. This …
2nd December 2022
Sharp drop in prices as market adjusts to higher mortgage rates The 1.4% m/m drop in house prices in November was far larger than anyone expected, raising the risk that prices fall more rapidly and further in response to high mortgage rates than we …
1st December 2022
As we now think Bank Rate will peak at 4.50% next year as opposed to 5.00%, mortgage rates will be a bit lower in 2023. But ultimately, the surge in mortgage rates over the past year will leave the cost of buying a home with a mortgage exceptionally high, …
30th November 2022
Slump in approvals points to sharper downturn in activity ahead Rocketing mortgage rates led to a sharp drop in mortgage approvals in October. While quoted mortgage rates have peaked they are unlikely to fall much below 5% next year, keeping the cost of …
29th November 2022
Chief Property Economist Andrew Burrell and Andrew Wishart , who leads our UK housing coverage, held a briefing on the shape of the coming downturn in the UK housing market. During this 20-minute session, the team answered client questions including: …
28th November 2022
The record-low yields on rental properties and fall in house prices we forecast imply poor returns for Buy-to-Let (BTL) landlords over the next few years. Moreover, the jump in mortgage rates means a significant minority of them will see mortgage …
23rd November 2022
The recent surge in rental growth to a record high has been widely reported, but the usual explanations are unsatisfactory. Population indicators don’t suggest a sudden rise in demand, and there is little evidence of landlords selling up. Instead, we …
16th November 2022
Demand collapses The October RICS Residential survey showed that the spike in quoted mortgage rates to over 6%, a level last seen in 2008, has triggered a collapse in buyer demand comparable to that seen in the financial crisis. That’s consistent with our …
10th November 2022
Halifax confirms house price declines are now entrenched The 0.4% m/m fall in house prices reported by Halifax backs up the data from Nationwide that house price falls are becoming entrenched. Surging mortgage interest rates have flattened demand, as many …
7th November 2022
Improvement in headline index will not last long As was the case last month, an improvement in delivery times and subcontractor availability drove a surprise rise on the headline construction PMI in October. But a slowing economy and higher financing …
4th November 2022
House prices now falling as higher mortgage rates bite The jump in mortgage interest rates is now being felt in house prices, with Nationwide reporting the first month-on-month fall since July 2021. House prices are now set to stay on a sustained downward …
1st November 2022
Approvals begin to fall as rising rates take effect Mortgage approvals fell in September as buyers began to adjust to rising interest rates. With further rate rises likely in the coming months, we expect this downward trend to continue and for lending to …
31st October 2022
Overview – The jump in market interest rates following the ill-advised “mini” budget has forced quoted mortgage rates up to over 5%, a level not seen since 2009. That will turn the slowdown in demand already evident in the survey data into a collapse, as …
While interest rates are unlikely to rise as high as investors expected in the immediate aftermath of the “mini budget”, those hoping that the surge in mortgage rates since will be reversed are likely to be disappointed. Admittedly, the peak in Bank …
21st October 2022
Overview – The drag on the economy from CPI inflation being stuck at 10% for a year and interest rates rising to 5.00% will be enough to trigger a recession that involves real GDP declining by around 2.0% from its peak to its trough. What’s more, …
20th October 2022
The UK property market has a long history of either causing or worsening recessions. But that history has taught both banks and regulators a lesson. So while higher debt payments, falling property prices and a slump in construction will play a major …
19th October 2022
Credit conditions already tightening prior to market turmoil The Q3 credit conditions survey doesn’t capture the impact of the market turmoil of recent weeks, with the deadline for responses falling a week before the “mini-budget”. Nonetheless, it shows …
13th October 2022
Growing acceptance price falls are in the pipeline While optimists can still point to limited supply, a fifth consecutive drop in new buyer enquiries in the RICS survey in September has convinced a majority of surveyors that house prices are heading for a …
Central banks have the tools to deal with liquidity crises arising from rising interest rates and falling asset prices. Instead, the bigger threat is that higher interest rates produce large and simultaneous falls in asset prices that threaten the …
11th October 2022
Its widely accepted that the jump in mortgage rates from 1.5% last autumn to 6% means that a significant fall in house prices is now inevitable. In this Update we set out how we came to our forecast that prices will fall by around 12% in nominal terms, …
10th October 2022
Halifax confirms that house prices have stalled The 0.1% monthly fall in the Halifax house price index in September echoed the message from Nationwide earlier this week that house prices have now stalled. Given the sharp rise in mortgage rates over the …
7th October 2022
The scale of the increase in mortgage rates means that a large rise in mortgage arrears and repossessions is probably unavoidable. But substantial capital buffers mean lenders will be able to absorb the resulting losses without causing lasting problems …
4th October 2022
Jump in approvals likely a rush to beat soaring rates The surprise jump in mortgage approvals in August probably reflected a rush to lock in mortgage offers as interest rates surged. There is a possibility that could be repeated next month, but …
30th September 2022
The stall that precedes the fall The stall in house prices in September was little surprise given the growing downward pressure on demand from rising mortgage rates. We suspect that, despite the reduction in stamp duty announced last week, this marks …
The rise in market interest rates that has already happened will push up mortgage rates to at least 6% and reduce the size of loans that lenders can offer. The resulting drop in buying power makes a significant drop in house prices inevitable. Many …
27th September 2022
Investors have revised up how far they expect the Bank of England to raise interest rates as they continue to digest the tax cuts announced on Friday. This Update examines what the impact on the housing market would be, and whether that could prevent …
The Chancellor took a rare, targeted approach to Stamp Duty in today’s vast package of tax cuts. The changes will remove the tax altogether for large numbers of buyers while retaining most of the revenue. But the bigger near-term implication of fiscal …
23rd September 2022
The upward revision to our Bank Rate forecast means that mortgage rates will rise further and faster than we previously envisaged, to a peak of 4.7% in March. The resulting higher cost of mortgage repayments will make the fall in buyer demand that has …
21st September 2022
Arrears will rise as lenders adjust to higher rates The detailed mortgage lending data for Q2 show solid lending volumes, growing leniency on deposit sizes and income multiples, and arrears at a record low. But the ongoing adjustment to higher interest …
14th September 2022
London house prices and transactions have proven resilient to the headwinds of the cost-of-living crisis and rising mortgage rates so far. House price growth in London rose to 7.2% y/y in Q2, the highest since 2016. But that was still below the national …
13th September 2022
PM Liz Truss’ fiscal package will limit the size of the forthcoming recession, but that may force the Bank of England to raise rates further to get inflation back to target in the medium term. As a result, it increases the likelihood that mortgage rates …
8th September 2022
Downturn becoming entrenched A further deterioration in demand in August has led surveyors to accept that a fall in prices is coming. The survey is already consistent with prices falling by 2% q/q in Q4 this year, and the headwinds to demand will only …
House prices rise while outlook deteriorates The modest 0.4% rise recorded by Halifax in August confirms that house prices have continued to increase despite the sharp increases in mortgage rates we have seen so far and growing pressure on household …
7th September 2022
Rise masks deteriorating outlook The surprise increase in the construction PMI is little cause for optimism given it was driven by the reversal of an idiosyncratic fall in civil engineering activity a month earlier. Indeed, the commercial activity …
6th September 2022
Don’t read too much into solid August gain The solid 0.8% m/m increase in house prices in August suggested that house prices managed to retain some positive momentum despite growing pressure on households’ finances. But the drag on demand from the …
1st September 2022
Rising mortgage rates will sustain downward trend in approvals While mortgage approvals ticked up in July, that only reversed a fraction of their previous decline. And the drag on buyer demand from the ongoing increase in mortgage rates and surging …
30th August 2022
Prime central London (PCL) house prices have underperformed even disappointing wider London trends over recent years. But the latest data have been more encouraging and with prime buyers less exposed to rising interest rates and the cost-of-living …
23rd August 2022
The latest figures suggest that Build to Rent (BTR) investment has continued to expand rapidly. Despite this trend, which predates COVID-19, the sector remains under-developed by international standards. But with plenty of opportunities for investors, we …
16th August 2022
Overview – Tight supply has supported house prices so far, but they now appear to be stalling. Demand will only deteriorate further over the coming quarters as rising mortgage rates, high inflation, and the recession weigh on buyers’ budgets and …
12th August 2022
Limited supply supporting pricing for now The RICS survey showed that weaker demand has not yet fed through to falls in prices, but sales volumes are beginning to wilt. We think it is just a matter of time before prices follow activity lower. The new …
11th August 2022
House prices stall Like Nationwide, Halifax reported that house price growth ground to a halt in July. As these house price indices are based on mortgage approvals, its possible that affordability rules put a temporary brake on prices. But equally it …
5th August 2022
Optimism misplaced as activity slows The fourth consecutive decline in the headline construction PMI took the index below 50 for the first time since January 2021. While driven by an idiosyncratic drop in civil engineering activity, the upbeat new orders …
4th August 2022
