House prices to plunge £26,550

And now Hunt throws stamp duty cuts into reverse

HOUSE prices are expected to fall by an average of £26,550 by the summer of 2024, according to the office for Budget Responsibility.

The oBR says property values will drop 9 per cent by the third quarter of 2024, largely driven by ‘significantly higher mortgage rates as well as the wider economic downturn’.

That would bring the average home price to around £268,450, wiping out price increases in the last 12 months.

Permanent stamp duty cuts announced in September’s mini-Budget will now only remain in place until March 2025.

Yesterday Chancellor Jeremy Hunt said: ‘The oBR expects housing activity to slow over the next two years, so the stamp duty cuts announced in the mini-Budget will remain in place but only until March 31, 2025. After that, I

‘Low supply, high demand’

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.’

on September 23, the Government increased the threshold at which stamp duty was paid from £125,000 to £250,000 for all residential properties purchased in England and Northern Ireland.

For first- time buyers, the threshold was increased from £300,000 to £425,000. Those purchasing their first homes could also claim tax relief on properties up to £625,000, up from £500,000 previously. All of these changes will be reversed.

Paul Johnson, director of the Institute for Fiscal Studies, said:

‘ The cuts to stamp duty announced in the mini-Budget will be abolished... about the only good policy in that event.’

The oBR also predicted mortgage rates typically paid by homeowners will rise from 3 per cent now to 5 per cent by the end of 2024, the highest level since 2008.

That is 1.8 percentage points above its March forecast.

More than four in five mortgage deals are currently fixed. The Bank of England says two million mortgage holders will come to the end of their fixedrate deal in 2023.

Home loan rates are expected to still be at 4.6 per cent by 2028, suggesting the era of historic rock-bottom deals is over. That comes despite some recent rate cuts from major lenders. David Hollingworth, a broker at London and Country, said: ‘Much has happened since March. Base rate expectations are falling back after the spike in the miniBudget and we are starting to see that feed through into mortgage rates.

‘ Some five- year rates have come back below 5 per cent and we will potentially see more momentum there.’

The average property is now worth £295,000, according to office for National Statistics data released earlier in the week. The oNS says house prices rose £26,000 in the year to September, meaning the oBR’s forecasted drop would wipe out all growth.

Andrew Montlake, of Coreco mortgage brokerage, said: ‘After property prices boiled over, what we’re seeing now is the pandemic froth coming off.

‘During the last stamp duty cut, low supply and high demand led to the increase in house prices. All of that is going to ease back off.’