You are here: Home - News -

House prices predicted to rise just 1% until 2021, but no rate rise in 2018

  • 11/08/2017
  • 0
House prices predicted to rise just 1% until 2021, but no rate rise in 2018
Sluggish house price growth is set to continue for the foreseeable future and interest rates are unlikely to be raised until 2019, according to Oxford Economics.

The analysts believe wider economic conditions could result in a permanently lower level of transactions and a further decline in the number of households with mortgages.

A report published by the business based at Oxford University predicts that over the next three years house prices will rise at an annual average rate of only 1%.

It added that it does not expect a majority of members on the Bank of England’s Monetary Policy Committee to support a rise in the Bank Rate until 2019, implying mortgage rates are unlikely to see any uplift soon.

“UK house price growth is running out of steam,” it said, “and with household incomes squeezed and the affordability of housing stretched, we think a prolonged period of very modest growth lies ahead. But the prospect of a crash is remote.”


Oxford Economics said there were three main reasons for its prediction:

  • The first was weak growth in households’ real income, cutting the ability to save for a deposit or finance a move up the housing ladder, although it acknowledged that past periods of sluggish income growth had not always been associated with low house price inflation.
  • Second was the consequence of recent tax hikes imposed on buy-to-let investors and second-home owners, which should be capitalised in lower property prices.
  • The third, and perhaps most important reason, was the increasing unaffordability of housing to an ever-widening sub-set of the population. The ratio of house prices to earnings is almost back at its pre-crisis record and the income of the average mortgage borrower is close to £60,000, more than double the average annual wage.


The report authors suggested this third factor had implications beyond price growth, with both a permanently lower level of transactions and a further decline in the number of households with mortgages, continuing a trend which began at the beginning of the century.


Mortgage affordability cushion

However, the report acknowledges that record lows for both mortgage rates and mortgage affordability provide some cushion to the three negative factors.

Encouragingly the analysts believe a well-capitalised banking sector should mean risks around credit supply are minimal and so the big drivers of house price crashes in the past (sharp rises in interest rates and/or a credit crunch, with major job losses and recession following) look like remote possibilities.

“Overall, house prices are caught between a lack of traditional drivers of accelerating growth, but equally an absence of forces which have typically caused prices to fall. Hence, our expectation of a period of sluggish, but relatively stable, growth,” it concluded.

There are 3 Comment(s)

You may also be interested in

Business Skills

In this section, we offer short ‘how to’ guides on harder to crack areas of business. From social media, to regulation or niche product areas, we cover it all.


Our journalists interview key industry entrepreneurs, strategists and commentators for day-to-day market insight and a strategic view of where the industry is heading. We offer lessons for success and explore the opportunities for your business

Success in Practice

Here, we share case studies fleshing out best practice to help you decide what could work for your business. Take a look at how others approached complex tasks like launching a new mortgage lender, advising on a new product area or deciding to specialise in another. Learn from others mistakes and triumphs.


Each week, we ask top mortgage and property commentators with a unique perspective to examine a key news headline, market move or regulatory or political issue.


Vote in our weekly poll here. It’s your chance to tell us what you think and be heard on the top news stories of the week. Review our archive to find out what your industry really thinks and all our coverage of the results.

Top Comments

Be part of the conversation on Mortgage Solutions. We want to hear from you. We have a tool called Disqus to tell us which stories get the most comments each week. Every Friday, the team picks the most thoughtful or opinionated contributions from our readers to enjoy again. Don’t forget to share your favourite stories from the site on social media to keep the conversation going.

Read previous post:
Dale Jannels
AToM on specialist roadshow tour

Distributor Atom (All Types of Mortgages) is presenting a series of meet the lender roadshows across the UK in September...