• 8 out of 11 experts predict that house prices will fall by between 5% and 10% in 2024
• Despite this, only 1 out of 11 experts believes that a housing market crash is on the horizon
• 91% of experts believe the base rate will remain paused until the end of the year
• Almost half of experts (46%) believe the UK will enter a recession in 2024 if the base rate does not come down before the end of the year

02, November, 2023, LONDON –

A panel of experts are in agreement that house prices will continue to fall by as much as 10% between now and Autumn 2024, according to new research conducted by personal finance comparison website, finder.com.

Finder brought together an expert panel of academics, economists, mortgage and savings experts, to ask them for their predictions on what will happen to the base rate for the rest of 2023, and the impact this will have on the UK economy.

Almost three quarters of the experts (73%) believe that house prices will fall between 5% – 10%, with more than half expecting prices to fall between 5% – 7.5%, and 18% predicting a more substantial drop of 7.5% – 10%.

Charles Read, fellow in economics at the University of Cambridge expects house prices to drop by 5% – 7.5%. He explained that “sharp rises in interest rates since the end of 2021 has reduced affordability of mortgages and new house purchases, pushing down prices”.

David Mcmillan, professor in finance at the University of Stirling expects a more severe reduction of 7.5% – 10%. McMillan explained that household incomes will be “squeezed in several ways” next year and “as much as these economic conditions will lead to price falls, they will also likely lead to a fall in the volume of transactions.”

David Hollingworth, associate director at L&C Mortgages agrees that house prices will fall but not significantly, as he expects buyer confidence could grow. He commented that “as the rate outlook improves and mortgage rates stabilise and continue to improve, that could see buyer confidence begin to improve into next year which will likely see a soft landing.”

Experts agree that a UK housing market crash is not on the horizon

Despite a rather dire outlook for house prices in 2024, experts are confident that a housing market crash is not on the horizon, with 8 out of 11 (73%) predicting the UK will avoid a crash of this kind.

Luciano Rispoli, senior lecturer in economics at the University of Surrey commented: “Despite higher interest rates, housing demand is still strong and supply structurally low.”

Kate Steere, deputy editor at finder.com added that the UK housing market is “now in a period of adjustment, where prices have fallen and will continue to fall from their previous highs. But the fundamental concept of a shortage of supply and solid demand will stop house prices from spiralling downward.”

Sam Miley, managing economist and forecasting lead at CEBR was the only expert who anticipates that a housing market crash is on the horizon, citing high borrowing rates and a downward pressure on demand as the key causes: “Interest rates are expected to remain higher than their pre-crisis levels well into the mid-2020s. This makes borrowing more expensive, putting downward pressure on demand from buyers. It also makes debt servicing costs more expensive for those on flexible tariffs, which could encourage forced selling and hence an expansion in supply.”

The base rate will remain at 5.25% until the end of 2023

10 of the 11 experts (91%) expect that the base rate will now remain at 5.25% until the end of the year, with just one expert predicting it will fall to 5% in December.

Paul Dales, chief UK economist at Capital Economics, believes that the base rate will hold at its current rate, and offered his thoughts on the longer-term picture, stating that “the Bank seems intent on keeping rates high for long rather than taking them higher and cutting them again. Our forecast that core inflation and wage growth will fall only slowly suggests that the Bank will keep interest rates at their peak for a long time – perhaps until late in 2024.”

Luciano Rispoli added, “I believe the Bank will want to wait for further inflation data before committing to a change of policy. Therefore, I believe that interest rates will be on hold for a while”.

Alan Shipman, senior lecturer in economics at the Open University, was the only expert to predict that the BoE will lower rates once more before the end of the year. He commented that, “falling inflation, slower fourth-quarter GDP growth, and signs of private-sector debt problems will persuade the MPC to start reducing interest rates by year-end.”

The UK could be heading for a recession in 2024

Almost half of experts (46%) believe that the UK could enter a recession during 2024 if the base rate does not come down before the end of the year.

David McMillan, professor in finance at the University of Stirling, thinks that a recession is likely, explaining that “the UK economy has essentially shown zero growth since emerging from the Covid-19 bounce-back”.

He outlines the various factors involved: “The unemployment rate is slowly ticking up and, as noted, the number of vacancies is declining. Pay growth may have already peaked, while tax thresholds result in falling disposable income. Combined with geopolitical tensions, there is likely to be an increase in energy (fuel) prices and less discretionary spending”.

With this in mind, McMillan argues that “There needs to be a clear path to rate falls in order to encourage households and firms to spend and have greater confidence in the direction of the economy.”

On the other hand, over a quarter of the panel (27%) do not believe there will be a recession in 2024. Stephen Sillars, savings and investments editor at Chip is hopeful that the UK will be able to avoid this outcome, he commented “one small positive for the UK economy in 2023 is it’s shown itself to be resilient, so I don’t feel that a base rate cut is needed imminently to avoid a recession.”

David Hollingworth echoed this sentiment, adding that “there’s still so much uncertainty that I think a cut before the end of the year could result in markets feeling that policy is being loosened too soon, which could derail the improvements to mortgage rates.”

A further 27% of the expert panel believe that it could go either way. Kate Steere noted that “economic growth has been weak, essentially showing zero growth for most of this year. We are still waiting for the increased rates to properly trickle through into the economy, with many households coming off fixed terms and going on to higher mortgage rates over the coming years. While the UK economy is resilient, there is a danger that this will tip the balance and push what slow growth it has had into a decline.”

Luciano Rispoli agreed that he could not be sure on the outcome for the UK economy next year, claiming that “it would depend on the “knock-on effect” of past cumulative interest rate rises. The danger is that these have not yet transmitted fully to the real economy”.

To see the research in full visit: https://www.finder.com/uk/base-rate-survey