A new forecast for UK house prices has been reported and according to the Office for Budget Responsibility (OBR), house prices are set to decline by 10% against the average peak of last year. The reasoning behind this forecast is due to inflation and higher interest rates. House prices could then begin to rise again in 2026. However, this will come as little condolence to homeowners that will have further financial strains due to a decline in property values and continued higher interest rates.

The forecast of 10% was higher than the previously predicted decline of 9% made in November.

The decline in house prices will however come as good news for hopeful home buyers that have been pushed out of the market due to higher asking prices and higher interest rate mortgages.

Interest rates have been increasing since December 2021. The Bank of England’s Monetary Policy Committee (MPC) has hiked the standard base interest rate during each of the last ten consecutive MPC meetings. During that time, the rate has risen from almost zero at 0.1% to 4.0%. Another MPC meeting is to be held this month and experts have forecasted either a 0.25% or 0.50% rate hike.

There are some that believe the rate will stay steady and that rates have risen enough. However, inflation, which was last reported still in double digits, has a long way to decline to reach the Bank’s target of 2.0%. This month’s MPC meeting will include a report on inflation and will help direct the decision of the committee. 

In the spring budget report, inflation was expected to fall from 10.7% to just above target at 2.9% by the end of this year and a recession has hopefully been avoided. 

It’s not all good news, due to inflation, the cost of living is forecasted to cause a decline in household disposable income per person by 3.7%.

The dire outlook on household budgets and the optimistic outlook on inflation could keep the MPC from increasing the standard base rate this month. However, there is not a scheduled meeting for April and the committee could feel that inflation still needs to be pushed in the right direction than allow until May to address any issues and will choose a small rate hike.

Homeowners should be alert as to any further rate hikes and how that could impact their repayments. Those on variable rate mortgages could be subject to an increase. Experts are cautioning those that have had their mortgage term end and did not remortgage to review their current rate. They should consider shopping for a new deal as this could be an opportunity to save money and avoid paying more than necessary.

When a mortgage term ends, a homeowner could remortgage or they can allow their lender to move them to their standard variable rate (SVR). The SVR is usually higher than the rate found with a remortgage, which means it is more expensive and repayments will be higher than with a remortgage. Also, with a remortgage a fixed rate could be chosen which would shield the homeowner from further rate hikes.

Shopping for a remortgage online is fast and simple.

Going from a remortgage lender website to another will put quotes in hand to find the best remortgage deal. The homeowner could also shop online with a remortgage broker and in one website stop obtain many quotes from a variety of lenders. Brokers could also have exclusive deals not directly offered from lenders to borrowers.

The economic outlook could become more optimistic, but that doesn’t mean that households will feel relief anytime soon. It could be late into next year or even as far as 2026 before recovery is felt in households. To find financial relief and to shield against further rate hikes and higher repayments, experts encourage homeowners to shop for a remortgage. In a matter of minutes, discovering a substantial savings as well as peace of mind could be possible.