Recovery delayed by higher mortgage rates

The upward revisions to our Bank Rate and gilt yield forecasts due to the ongoing energy price shock suggest higher mortgage rates will remain a drag on housing for longer. Our forecast is for house prices to rise by 1.5% in 2027 (2.5% previously) and by 3.0% in 2028 (3.0% previously). With higher mortgage rates making it harder for renters to buy, we now expect market rents to rise by 4.0% in 2027 (3.5% previously) and by 3.5% in 2028 (3.5% previously). Our forecasts imply that in real terms market rents will continue to rise while real house prices fall in 2027. We will be discussing what happened in the Budget at 3pm GMT on Wednesday 28^th October (register here).

Read the full publication to find out how our Bank Rate forecast compares with market pricing, and how much the Your First Home scheme could add to transactions. You’ll also see the three reasons we still expect house prices to rise in 2028, and when the South of England is likely to outperform the North. All of this is backed by 20 charts and our full set of forecasts.