A journalist at TIM/Mail Online is writing a story on house prices/rising mortgage rates this morning and is looking for a couple of quick comments. The story is based on a Capital Economics report which says:
Our new, higher, interest rate forecasts mean that we now expect house prices to fall marginally in 2023 and 2024. While there are risks on both sides, our base case is that prices drop by 5% overall, reversing a fifth of the surge in house prices since the pandemic began.
The reasons, it says, are rising inflation and increasing mortgage rates:
Lenders have been slow to pass on rising interest rates so far, so we expect a sharp rise in mortgage rates in the months ahead. For example, some banks are offering 60% LTV mortgages at 2.2%, in line with the 2-year interest swap rate. If Bank Rate were to rise as expected by financial markets, lenders would make no profit on such loans so it is inevitable that rates will rise further.
We expect the average rate on new mortgages to rise from 1.8% in Q1 to 3.3% by end-2022 and to a peak of 3.6% in 2023 as lenders rebuild their margins. That would be the sharpest rise in mortgage rates since 1990, consistent with an abrupt slowdown in house price inflation.
Journalist is keen to get views on whether house prices are likely to fall by this much, and what this will mean for home buyers/sellers? Could taking some of the heat out of the market be welcome for some - even if mortgages are more expensive? Deadline is midday.