Partway through the correction

While house price declines have slowed and economic activity has proven more resilient than expected over the three months since our last Outlook, we are sticking to our forecast that house prices will fall by 12% in total. Persistent core inflation and wage pressures will prevent the Bank of England from cutting interest rates until 2024, which means that mortgage rates won’t fall any further until next year. The resulting high cost of mortgage borrowing will prevent a recovery in demand, lending, and sales until interest rates are cut in 2024. Many of those that can’t afford to buy will carry on renting, adding to demand in the rental market at a time when some landlords are likely to sell, ensuring rental growth remains strong and adding to the downward pressure on prices.