Larger mortgages challenge weak house price forecasts

The fact buyers are using lower mortgage rates to borrow more, rather than spend less on repayments, is a major challenge to the view house price growth will be weak in the years ahead. If there has been a permanent increase in the amount households are willing to borrow, the fall in interest rates we forecast is likely to lead to a stronger rise in house prices. But it will also leave the market more vulnerable to future shocks.