Average mortgage rate to fall to 1.6 per cent by next year
Capital Economics has suggested the average mortgage rate will fall to 1.6 per cent by the end of next year.
Average mortgage rates sat around 2.1 per cent from 2017 to 2019 the firm said, before dropping to 1.85 per cent in July this year as lenders’ risk appetite improved.
Yorkshire Building Society’s chief executive Mike Regnier also suggested rates would remain low due to excess liquidity in the market.
Additionally, the Bank of England is expected to keep the base rate at its current record low of 0.1 per cent until 2023 which will support cheaper lending.
Capital Economics said this coupled with a lack of supply would keep property prices high.
The number of second hand homes on the market is close to its lowest level on record and declining seller instructions recorded by the Royal Institution of Chartered Surveyors (RICS) indicated a slowdown in new listings.
In June, Propertymark NAEA warned that the average stock per each estate agency branch was at a 19-year low.
The firm also pointed to annual house price growth in other countries such as Germany, the Netherlands, Denmark and the US where respective increases of nine per cent, 11 per cent, 15 per cent and 18 per cent have been seen.
Within the UK, increased household savings and continued home working could also influence moves providing an additional boost to house price growth.
As a result Capital Economics revised its forecast for house price growth for next year up from 3.5 per cent to five per cent.
Andrew Wishart, property economist at Capital Economics, said: “The end of the stamp duty holiday may do little to dampen demand and homes for sale are in short supply.
“Overall, tight supply and robust demand mean that house prices will retain their momentum, so the consensus forecast that house prices will rise by 3.5 per cent in 2022 now looks too pessimistic.”