House price gains have further to run

It is likely to take longer than most expect for rising interest rates to cool the housing market. Mortgage rates have only just begun to rise from the record low reached in November, and limited supply, high household savings, and the boost to housing demand from remote working all remain in place. As a result, we expect house prices to maintain their recent momentum in the near term and rise by a further 5% this year, above the current consensus. That said, an increase in mortgage rates from 1.6% to 2.5% by year-end will eventually cool demand, and house price growth will start to slow from the summer.