Recent housing data suggest that although our forecast of a 5% fall in house prices this year is broadly on track, the risk of a weaker outcome has risen. We have also reduced our forecasts for economic growth both this year and next. The Bank of England’s Special Liquidity Scheme may ease mortgage funding concerns a little, but newly risk-averse lenders will not reverse much of the recent tightening in lending criteria. As a result, we have cut our forecasts for house prices. We expect them to fall 8% this year and 10% next. • We expect GDP growth of just 1% next year, down from 1.7% in the previous Analyst. Unlike the consensus, we expect the economy to be weaker in 2009 than in 2008, which, in turn, is part of the reason we expect a protracted correction in house prices.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services