Activity to slump as prices adjust to higher rates

2023 will be the most difficult year for the housing market since 2008. Mortgage rates remain very high by the standards of recent years and can’t drop materially until the Bank of England shifts from raising interest rates to cutting them. We don’t expect that to happen until 2024, so buyer demand will remain very weak throughout the year causing sales volumes to slump by 30% and a further 10.5% drop in house prices on top of the 2% fall we have already seen. Lower house prices and a meaningful decline in mortgage rates next year should improve mortgage affordability enough for demand to recover from early 2024, allowing activity to pick up and prices to stabilise.