How vulnerable are house prices to a rise in rates?

Our forecast for mortgage rates to rise to 4.2% by end-2023 will help slow house price gains, but we don’t think that increase will be enough to cause an outright fall in values. And with homes not particularly overvalued, inventory close to record lows and nearly all borrowers protected by fixed rates even a more substantial rise in interest rates is unlikely to cause a crash in values. For example, we think a surge in mortgage rates to 6% by end-2023 would only bring prices down by around 5% over the next 2½ years, taking values back to where they were at the start of 2021.