The stuttering jobs market and the softening outlook for wage growth means we now expect house prices to rise by only 2.0% in the year to Q4 2025 (3.5% previously). But our view that Bank Rate will fall from 4.25% now to 3.00% next year rather than to the low of 3.50% as investors anticipate implies a bigger drop in mortgage rates than most expect. That will allow house prices in the year to Q4 to rise by an above-consensus 5.0% in 2026 (4.5% previously) and by 3.5% in 2027. The rise in prices next year may be more modest if further falls in employment and/or a rise in taxes in the Autumn Budget dents consumer confidence and restrains real household disposable income growth by more than we expect.
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