Soaring mortgage rates will cause house prices to fall by 10pc over the next two years, one of Britain’s most high-profile estate agents has warned.
A storm of inflation, rocketing interest rates and plunging affordability will place downwards pressure on property prices, Knight Frank said.
Tom Bill, of the estate agents, predicted a 10pc fall in property values across 2023 and 2024.
Previously, Knight Frank had forecast 1pc house price growth next year and 2pc growth in 2024. Mr Bill said price drops would begin in the coming months.
At the start of the pandemic, there were widespread forecasts of house price falls which never materialised. But the outlook today is very different because swap rates – the rates used by banks to price mortgages alongside the central Bank Rate – have surged, Mr Bill said.
“The five-year swap rate was less than 1pc back then. The swap rate is now up at around 5pc,” Mr Bill said.
This means rising costs will be passed on quickly to buyers and homeowners, he added.
“Any savings from the stamp duty cuts will be eclipsed by higher mortgage rates,” Mr Bill said.
The average rate on a two-year fix hit 6.07pc on Wednesday, according to Moneyfacts, an analyst. This has tripled since July 2020 and was the first time the rate has surpassed 6pc since November 2008.