The larger than anticipated rebound in mortgage approvals in March and a slowdown (or even partial reversal) of house price falls suggested that the housing market downturn may have ended much earlier than we anticipated. The unwinding of some of the autumn 2022 spike in mortgage rates and a lengthening of mortgage terms has improved affordability. Alongside robust demand from cash buyers and a limited number of homes for sale that has supported prices. However, it is a fragile situation. Mortgage rates can’t fall any further in the near term and may even rise, while survey measures of buyer demand are still very soft. (See Chart 1.) So, although the data point to a more benign outlook than in our forecast, we suspect a further leg down in house prices is more likely than a sustained recovery.
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