Despite a modest boost to housing demand from the Your First Home scheme, high mortgage rates will limit house price gains to just 1.5% in the year to Q4 2027. By making it difficult for renters to buy, high mortgage rates will also push up market rents inflation from 2.6% in July to about 4.0% next year. And the further tax hike on landlords announced in the Budget from next April may mean rents growth stays higher for longer. What’s more, the ratcheting up of energy prices increases the chances of interest rates, and therefore mortgage rates, rising further than we expect. This underscores both the upsides to our rents growth forecasts and the downsides to our house price forecasts.
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