UK housing market slump will be shallow but protracted

Significance

Fixed-rate mortgages now dominate the lending market, with interest rates above 5% compared with 1.5% one year ago. For first-time buyers, mortgage payments now account for the highest share of take-home pay since the global financial crisis. Many face being priced out of the market.

Impacts

• The softening housing market and economy should enable the Bank of England to stop raising rates by mid-2023 and cut rates in 2024.
• Mortgage lenders are developing products to address the changing demands of this economic climate, and expect more remortgage business.
• Private housing construction will be worst affected; limiting the damage, builders are focusing on finishing existing sites, not new ones.