Estate agents expect house prices to crash by 10pc in shattering blow

BBC caller worried he's going to lose his house to the bank

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Millions of homeowners have been dealt a shattering blow after the first big estate agency to amend its forecasts after the mini-budget predicted house prices will plunge by 10 percent in the next two years. Rising interest rates, along with the continued cost of living crisis and high inflation forecasts have caused Tom Bill, head of residential research at Knight Frank, to dramatically revise a forecast he made in June.

Just a few months ago, he had predicted one percent growth next year and a three percent rise in 2024, but has now warned UK house prices will nosedive by an average of five percent in each of the next two years, taking them “back to the same level as last summer”.

Property prices in Greater London, where affordability continues to be stretched, will drop even more suddenly, with a six per cent fall expected in 2023 followed by a four per cent drop the following year.

The luxury market, which is less reliant on mortgage loans, is also expected to experience a slump, with prices in prime Central London areas such as Mayfair and Belgravia predicted to fall by three per cent next year while levelling out in 2024.

Andrew Wishart, senior property economist at the Capital Economics consultancy, is also revising his forecasts and now warned of a 12 percent slump from “peak to trough” after previously estimating house prices would fall seven per cent.

In a huge warning to millions of UK homeowners, he said: “A large rise in mortgage arrears and repossessions is probably unavoidable.”

Estate agents and brokers have warned lenders’ valuations of homes have shrunk by tens of thousands of pounds in the past week alone, with some sellers forced into offering discounts in a desperate attempt to stop buyers pulling out.

Charlie Lamdin, founder of the property website BestAgent, said: “Anecdotally we are hearing about price drops of up to 20 per cent, although the data is showing more modest drops of 5-10 per cent.

“We are also starting to see property sales fall through as buyers find they can’t afford mortgages.”

The property market has been plunged into chaos since Chancellor Kwasi Kwarteng announced a huge £45billion of tax cuts in his mini-budget on September 23 in a desperate attempt to inject life back into the UK economy.

But shockwaves were sent thorough the housing sector, with more than 1,700 mortgage products pulled amid the financial turmoil that has engulfed the Conservative Party Government and the country as a whole.

Some 100 mortgage products have been reinstated in the past couple of days but the average two-year fixed rate has soared to 5.97 percent, up from 4.74 per cent on the day of Mr Kwarteng’s announcements and more than double the 2.38 percent a year ago.

Following the mini-budget, homeowners were warned to brace for the likelihood of mortgage misery, with the Bank of England urged to hike interest rates again, having recently just increased them to 2.25 percent.

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BoE Governor Andrew Bailey released a statement, saying the Monetary Policy Committee “will not hesitate to change interest rates by as much as needed to return inflation to the two percent target sustainably in the medium term, in line with its remit”.

The series of base rate increases from the BoE over recent months means a tracker mortgage is now about £210 per month more expensive on average than it was before the rate increases started at the end of last year.

The latest figures from UK Finance have stated a standard variable rate (SVR) mortgage is now about £132 more expensive per month.

Most mortgage holders are on fixed-rate deals, but 1.8million fixed deals are due to end next year, meaning some homeowners could be hit by bill shock when they decide to take out a new mortgage.

Prior to the BoE statement, Simon Jones, CEO of financial comparison site, told MailOnline: “Sterling’s slump is fuelling speculation that the Bank of England may need to take action by hiking interest rates even before rate-setters hold their next scheduled meeting in November.

“Remember, more than two million homeowners on variable rate mortgages are already reeling following seven successive increases in the base rate since last December.

“Millions more on fixed rate deals will find their repayments have skyrocketed when it comes time for them to re-mortgage.”

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