Fitch Ratings expects a nominal home price decline of 5-7% in the UK in 2023, leading to a peak-to-trough fall in the high single digits, mostly reversing the 10% growth from January to September 2022.
The firm stated: ‘We expect the trough to be reached towards the end of next year, but further price reductions into 2024 cannot be excluded. The sharp rise in interest rates, which is more pronounced for pound sterling than other European currencies, has significantly pressured affordability, which we expect to continue to be challenged in 2023 even if mortgage rates ease.
‘Fixed mortgage rates, which account for most new lending, were quoted above 6% in Q4 22, sharply up from about 1.5% at the start of the year. We expect fixed mortgage rates of 5-6% throughout 2023 and 2024.’
However, the firm added: ‘The UK continues to build insufficient new homes to meet demand, and this lack of supply supports a limited price decline despite the additional affordability challenges of inflation, falling real wages and an expected 1.3pp increase in unemployment by end-2024.’