House price falls in 2024 will be significantly less than previously predicted offering some comfort to homeowners, according to the government’s official forecaster.
New estimates from the Office for Budget Responsibility (OBR) have revised the predicted fall this year down from 5 percent to 2 percent.
In documents published alongside the Budget, it said the average house price will fall to slightly below £275,000 in the final quarter of 2024.
Looking ahead, it is predicting a 3.5 percent increase in both 2027 and 2028 on the basis of expectations of cheaper borrowing costs. Mortgage rates have been on a downward path since the end of last year, although they have begun to edge up in recent weeks.
A fall in the inflation rate to 2 percent in the coming months have brought predictions that the Bank of England will have room to reduce the base interest rate.
This is expected to feed through to cheaper home loans before the end of this year. Financial markets are currently betting that the BoE’s first rate cut could come in August.
The OBR says: “We expect house prices to fall around 2 percent in 2024, slightly under half of the 5 percent we expected in November. This is mainly due to our lower mortgage rate forecast.
“Supported by falling new mortgage rates, we then expect house prices to grow around 2 percent in 2026 and around 3.5 percent in 2027 and 2028.
“That would see nominal house prices surpass their historical peak in the first quarter of 2027.”
