Source: Jersey Evening Post
17 November 2022
House prices are expected to fall by nearly 10% over the next couple of years, largely driven by higher mortgage rates and the wider economic downturn. The Office for Budget Responsibility (OBR) said house prices are forecast to drop by 9% between the fourth quarter of 2022 and third quarter of 2024.
Average interest rates on the stock of outstanding mortgages are expected to pear at 5% in the second half of 2024, the highest level since 2008, it added.
Due to large numbers of home owners sitting on fixed-rate mortgages, higher interest rates on new deals take a while to feed through to the stock of existing home loans.
As the economy recovers, house prices are expected to be around seven times earnings, although the OBR said there is significant uncertainty over its forecast "given the sensitivity of house prices to mortgage rates and the recent volatility in the bond yields that drive pricing in the mortgage market"
The economic and fiscal outlook was released as Chancellor Jeremy Hunt said the stamp duty cuts previously announced in the mini-budget will remain in place but only until March 31 2025. Mr Hunt said: "After that I will sunset the measure, creating an incentive to support the housing market and all the jobs associated with it by boosting transactions during the period the economy most needs it"
The mini-budget changes raised the general threshold at which stamp duty applies from £125,000 to £250,000, lifting around 200,000 more people every year out of paying stamp duty, according to previous Government calculations. First time buyers, who already paid no stamp duty on the first £300,000 of the price of a property, saw the threshold raised to £425,000.
Institute for Fiscal Studies director Paul Johnson said Mr Hunt is abolishing "about the only good policy" from Kwasi Kwarteng's autumn mini-budget by removing the stamp duty cut in 2025.