Our forecast that earnings growth will rise to a nine-year high of 3.5% by the middle of 2019 might be expected to give house prices a boost, particularly given the lack of inventory. However, the concurrent rise in mortgage interest rates will more than offset the positive impact of higher earnings. Indeed, if not for the fact that mortgage affordability is starting from such a favourable level, the combination of earnings growth and interest rates we anticipate would lead to a modest fall in house prices.
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