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UK house prices could fall by 10% over next two years
The Moody’s Investor Service said: “Persistently high inflation and the recent spike in lending rates will trigger a correction in the UK housing market.”
This comes after a period of upward mortgage pricing across the market, as swap rates rose due to stubborn inflation. Although inflation fell to 8.7% in April, it was higher than the 8% to 8.5% that the markets predicted.
This led to speculation that the Bank of England’s Monetary Policy Committee could increase the base rate to as much as 5.5% this year.
Recession threat
Moody’s said a sharper house price drop of 21% would have “implications” for the UK’s economy and trigger a recession.
The report said if this happened, “the UK sovereign would enter a recession in the second half of 2023, lasting for six quarters. Unemployment would reach 6% by end 2024, still below its peak in the global financial crisis.”
In August last year, the Bank of England predicted that the UK would enter recession at the end of 2022 as GDP fell and inflation rose. Despite flat GDP growth in February, the economy has managed to stave off a “technical recession” for the time being after the measure increased by 0.1% in the three months to March.
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