Daily Mail

Slump in consumer confidence ‘to knock 10% off house prices’

- Money Mail Reporter By Adele Cooke

HOUSE prices are to fall by 10 per cent – but mortgage rates will not rise as high as feared last year, forecasts suggest.

The average rate of all outstandin­g home loans had been expected to hit 5 per cent next year.

But the figure is now predicted to be 3.8 per cent, according to the Office for Budget Responsibi­lity.

On a £250,000 mortgage taken out over 25 years, that is the difference between payments of £1,292 per month instead of £1,461, according to mortgage broker London & Country – a saving of £169 per month or £2,028 a year.

Neverthele­ss, the OBR is predicting that Britain is heading for the biggest decline in living standards on record. This is pummelling consumer confidence and likely to lead to a 10 per cent fall in house prices compared with their peak at the end of last year.

‘Low consumer confidence, the squeeze on real incomes, and the expectatio­n of mortgage rate rises

to come are expected to contribute to continued falls in house prices and a reduction in housing market activity,’ the OBR said.

The Bank of England has been increasing its base rate since December 2021 in an attempt to control spiralling inflation, which hit a 40-year high in September. The base rate increases have helped

drive up the cost of borrowing for millions at a time of squeezed household budgets.

However, experts – and the OBR report – suggest inflation may now be falling, meaning further rate rises may not be necessary.

Around 80 per cent of home loans are fixed and 1.4million of these will expire this year.

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