Post-Budget forecast a bit like the weather

It’s inevitable the day after a Budget, for that’s how Jeremy Hunt’s Autumn Statement is more accurately described, that the experts have read the runes and come up with gloomy forecasts.

Homeowners always watch with a sense of anxiety. They will have noted that council tax will rise, other taxes will get higher, and that the electric car they always promised themselves for cheaper running costs will now pay road tax just like the CO2 emitting car they already own.

But most startling was the Office for Budget Responsibility (OBR) forecast that house prices would fall by nine per cent between now and the end of 2024. That’s where the newspaper reports mostly stop but anyone who downloads the OBR report (freely available online) will see that the experts are fairly certain house price rises will be back in 2025.

OBR forecasters are also fairly positive about mortgage interest rates, pointing out the relatively large share of fixed-rate mortgages in the total (around 83 per cent in the second quarter of 2022 versus 51 per cent in 2007). It shows that after the last financial crash homebuyers got savvy and learned how to cushion themselves from the swings in mortgage payments effected by Base Rate changes.

As a result, higher rates on new mortgages take time to feed through to higher average mortgage rates and as Bank of England Governor Andrew Bailey pointed out earlier this month it’s likely that mortgage rates will not rise anything like the gloomsters predicted after the Kwarteng / Truss mini budget in September. Anyone who is looking to renew their mortgage deal next year can feel a little happier.

So what about house prices? They had already risen faster this year than the OBR was forecasting back in March so part of the predicted fall will be market adjustment. For most people, who are not planning to move anytime soon, current values are merely a conversation topic as they only represent paper rises until you cash in.

For those who want to move, prices will adjust across the whole market, affecting both what you want to sell and what you want to buy so it’s largely a state of equilibrium. Look at your house as somewhere you want to live, somewhere that suits your needs, and make choices accordingly.

As we have seen over the many decades since home ownership really took off postwar, the upward rise in values is inexorable and the market always recovers. Looking at the OBR and other forecasts it will do so faster than it did after the 2008 crash so the situation now is a temporary blip and not one that should affect your home buying decisions to any great degree.

For more information, contact Randalls Residential Estate Agents in Basingstoke on 01256 345635.