Falling house prices hit household wealth

A report from the Resolution Foundation think-tank suggests that higher interest rates could see house prices fall by as much a 25% over the next five years, taking the average price from £287,000 today to around £215,000. The report argues that higher interest rates could reduce the house-price-to-earnings ratio from its 2022 peak of 8.9 times a household’s income to 5.6 times. The report also shows that household wealth across Britain has fallen by £2.1trn over the past year. It said that a combination of rising mortgage rates, falling house prices and a collapse in the price of government and corporate bonds has led to total household wealth falling to 650% of national income. Although rising rates are squeezing mortgage holders, falling house prices could benefit young people hoping to get on the ladder in the years ahead, and the deposit barrier for first-time buyers could be reduced. 

Financial Times (18/07/2023)   The Daily Telegraph (18/07/2023)   The Times (18/07/2023)