According to a recent prediction by ratings agency S&P Global Ratings, the United Kingdom’s property market is bracing for a substantial downturn, with house prices projected to plummet by 12% from their peak by the end of 2024. The anticipated decline is largely attributed to the impact of soaring interest rates and correspondingly higher mortgage rates, with the norm now reaching a staggering 6%. As a result, many potential buyers are expected to face significant challenges in affording their dream homes.
S&P Global Ratings has estimated a 6.6% drop in UK house prices during the current year, followed by a further 4.9% decrease in 2024, signaling a prolonged period of uncertainty for the property market. These numbers reflect the ongoing trend, as government data already shows minor price decreases this year, though they remain relatively negligible. Between January and May 2023, typical house prices have seen a meager decline of around £2,000, but they still average nearly £286,000.
Boris Glass, a senior economist at S&P Global, commented on the situation, stating, “There is still some time to go before mortgage pain reaches its peak.” He emphasized that even if central banks ease restrictions in the future, mortgage holders and potential buyers will continue to face the repercussions of higher real costs of borrowing. This, in turn, will inevitably consume a larger portion of their budget, dampening demand for residential properties in the foreseeable future.
The Bank of England’s current base rate stands at 5.00%, with the next crucial decision scheduled for Thursday, 3 August. Market analysts widely expect further rate hikes in the coming months, with some hopeful for a more conservative increase of 0.25% next month. Such measures, if implemented, may provide some relief to homeowners and potential buyers alike. However, if the interest rates continue to escalate without control, there are genuine concerns that the UK might be pushed into an economic recession.
As the nation navigates these challenging times, potential buyers and current homeowners are advised to remain vigilant, seeking professional financial guidance and carefully assessing their options before making any significant property-related decisions. With the uncertain landscape ahead, a cautious and well-informed approach becomes paramount for those involved in the property market.