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What would a recession mean for house prices? Experts predict two-fold housing market jolt.



BRITAIN is on the brink of recession, the Bank of England announced today, as it hiked the UK's interest rate for the fifth consecutive quarter since 2021. What would a recession mean for house prices?


The Bank of England's announcement comes as the institution's Monetary Policy Committee (MPC) said it expects inflation to peak at 13.3 percent this year. Raising interest rates to 1.75 percent - an increase of 0.5 percent - boosted them to their highest level since 1995 and will leave borrowers with a burden. People on fixed-rate mortgages are among those who will see their bills increase at a critical time for the UK economy, with a possible knock-on effect on home values.

The UK's central bank expects spending will drop for up to a year with higher inflation as general economic activity declines.

Higher interest rates will kick off the lower spending, as experts predict an impact on mortgages.

Colby Short, co-founder and CEO of estate agent comparison site GetAgent, said more expensive loans would decrease the number of properties on the market.

Interest rates set to soar to a 13-year high

He said: “When interest rates rise, naturally, mortgage rates do too.

"With the prospect of taking on a new home loan becoming more undesirable, we will see a negative impact on the number of properties available for anyone hoping to sell, as well as those seeking to buy for the first time.

"Current mortgage-holders will also feel the effects, with repayments set to rise – variable rates will be pretty immediate, of course, but for those holding fixed rates as well, when those inevitably come up for renewal in the coming months and years."

Other experts don't think the recession will prove too damaging and that the economy is resilient enough for the property industry to hold out.

Recession property market: MPC

Recession property market: The MPC decided to raise interest rates today (Image: GETTY)
David Jabbari, CEO of nationwide conveyancers Muve, said unemployment would "moderate the downside" of the coming financial storm.

He said: "Traditionally, a recession will see more people out of work, fewer mortgage approvals and thus less demand from buyers, culminating in lower house prices.

"However, what has been remarkable about the UK economy over the past 10 years is that whatever has been thrown at it – including the pandemic we saw in 2020 and the high inflation we see today - unemployment has remained very low.

"This is a positive factor that will moderate the downside to house prices and we would not expect to see a dramatic decline as we have seen in previous recessions.

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Inflation is one of several factors that could encourage recession over the next year, with Britons now anticipating more regular price cap adjustments.

UK energy regulator Ofgem announced today that it would more regularly review its price cap in an announcement today.

The organisation revealed that it would update the cap - which limits the amount providers can charge their customers - every quarter.

Instead of updates in April and October, they face adjusted bills every three months as Ofgem bids to “adjust much more quickly” to the volatile market.

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