Housing market adjustment has further to run

The stagnation in the housing market is set to continue for the foreseeable future, as the combination of high house prices and rising mortgage rates, which are set to exceed 3% by 2020, hold the market back. Meanwhile, house price inflation will cool to 1% by 2019, as rising interest rates further constrain buyers’ ability to bid up prices. And in London, we expect a modest fall in house prices – of 2% this year, and 5% next year.