Recovery delayed by higher mortgage rates

The upward revisions to our Bank Rate and gilt yield forecasts due to the ongoing energy price shock suggest higher mortgage rates will remain a drag on housing for longer. Our forecast is for house prices to rise by 1.5% in 2027 (2.5% previously) and by 3.0% in 2028 (3.0% previously). With higher mortgage rates making it harder for renters to buy, we now expect market rents to rise by 4.0% in 2027 (3.5% previously) and by 3.5% in 2028 (3.5% previously). Our forecasts imply that in real terms market rents will continue to rise while real house prices fall in 2027. 

We will be discussing what to expect in the Budget in an in-person roundtable event at our office on Wednesday 14^th October (register here) and what happened in the Budget at 3pm GMT on Wednesday 28^th October (register here).