London House Prices Set To Fall

House prices in London are set to fall by 10% over the next two years after the Chancellor’s mini-Budget sent the mortgage market into meltdown.

Higher interest rates and mortgage repayments, tighter lending and the cost-of-living crisis could mean “a year of pain” for first-time buyers and existing mortgage-holders while sales plummet and prices slide.

Forecasts published today by estate agent Knight Frank predict a fall in the average house price across the capital of 10% over two years, taking values back to where they were at the start of 2021.

Kwasi Kwarteng’s emergency fiscal package was deemed to be “inflationary” and “reckless” by property analysts and even 12 days on, the industry is still struggling to predict how high interest rates will climb. Those mortgage products which were pulled off the shelves last week are still being repriced — adding to the chaos.

Knight Frank’s head of residential research, Tom Bill, feels the UK was in a state of disorientation. “Over the summer we were already anticipating rising interest rates to deal with global inflation caused by rising fuel costs and the war in Ukraine. Currently it looks as though the mini-Budget will push interest rates even higher. But we will re-evaluate as the picture becomes clearer,” he says.