House prices will probably remain flat for the rest of 2024, but lower mortgage rates will provide scope for prices to beat expectations next year. Indeed, our forecast that Bank Rate will be lowered by more than investors anticipate suggests the average mortgage rate could fall from 4.8% now to a little below 4.0% by the end of 2025. That would reinvigorate demand by making buying affordable again for many who are currently priced out. As a result, we expect mortgage approvals for house purchase to increase by 12% in 2025 and total transactions to rise by 8%. Evidence that buyers are content to stretch themselves further financially than in the past suggests that they will also take advantage of lower mortgage rates to take out larger mortgages. That’s why, after a modest increase in prices of 1.0% this year, we expect prices to rise by an above-consensus 5.0% in 2025 and a further 4.0% in 2026.
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