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.

Will they or won’t they is the question being asked concerning the next Bank of England’s Monetary Policy Committee (MPC) meeting on 23 March. The implications of another rate hike is that there could be a lot of negative impacts on consumers, especially homeowners and small business owners. Those with the largest value loans are going to be paying more if they are connected to a variable rate which means they are subject to further rate hikes after already being hit hard by the last ten MPC meetings. 

A recent report forecasted that an estimated 356,000 mortgage holders could find it difficult to pay their repayments, if at all, by summer of 2024. This could come as a surprise to some. It does, after all, forecast difficulties for homeowners into next year. They wouldn’t be wrong in being taken aback due to the many reports showing that inflation might have reached its peak and that corrections to the economy could be at work and all will be well soon. 

By the middle of next year, hundreds of thousands of young homeowners could be in financial trouble with their repayments according to the Financial Conduct Authority (FCA). Younger homeowners to age 34 are more likely to have difficulty due to higher interest rates. Yet, the FCA is not the only experts calling for homeowners to prepare for more financial strains before relief comes from a more stable economy. There have been many calling for homeowners to get familiar with their current mortgage and consider a remortgage to offer savings rather than pay more than necessary.

Homeowners are in need of help in this current economic environment. First, the pandemic took a toll on household budgets, then it was higher energy costs, inflation reached a 40 year high, and now interest rates are higher than they have been in over a decade. It should be noted that only over a year ago, interest rates were at historic lows from lenders, but now those cheap rates are long gone. In an effort to protect the household budget, experts are encouraging all homeowners to shop for a remortgage and that means putting aside any loyalty to the current lender in an effort to find the best deal.

The forecasts concerning the peak of inflation as well as the possible peak of the Bank of England’s standard base interest rate has been wavering rather than holding. In other words, no one can predict for sure what is ahead. At one point, only a few months ago, it was thought the base rate set by the Bank could reach 6% or higher. More recently it was predicted the rate could perhaps be at its expected high. Now, that is not so certain, and the Bank of England’s Monetary Policy Committee (MPC) could possibly have many more rate hikes ahead. This is not good news for borrowers, including home buyers and homeowners.