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Have house prices surged to an unsustainable level?

The surge in house prices and very high transaction volumes have led to concerns that the housing market is entering a bubble. After all, the house-price-to-earnings ratio has risen to a fresh all-time high. But because interest rates have continued to fall, mortgage affordability remains good. In fact, given we expect Bank Rate to remain at 0.10% for longer than most, we think that there is scope for house prices to increase by around a further 17% over the next four years.

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