The jump in market interest rates following the ill-advised “mini” budget has forced quoted mortgage rates up to over 5%, a level not seen since 2009. That will turn the slowdown in demand already evident in the survey data into a collapse, as higher interest rates make it too expensive for many prospective buyers to borrow enough to purchase a home. Even though mortgage rates are likely to drop back to 4% by 2024, we suspect that house prices will have to fall by 12% before affordability improves enough for demand to recover and the fall in prices to bottom out.
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