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Housing market heading for big fall this year, economists warn

The housing market will see its biggest decline since the financial crash in 2009, according to economic experts surveyed by The Times.

Rising mortgage costs and a likely recession are being blamed as the two main reasons for the looming situation. Two thirds of the economists surveyed predicted prices will fall by more than 4%, with most warning of near-double-digit drops.

Sanjay Raja, chief UK economist at Deutsche Bank, told The Times: “A double-digit price fall would not be surprising. If typical mortgage rates remain above 5%, together with an unprecedented squeeze on household incomes, it is hard to see how house prices can avoid taking a significant hit in 2023.”

The Bank of England warned homeowners are facing an average £3,000 rise in mortgage payments this year. Cheaper mortgage rates will help the housing market achieve a soft landing in 2023, Nationwide said, and avoiding forced sales will bolster its prospects further.

Andrew Goodwin, chief UK economist at Oxford Economics, said house prices were 30% overvalued based on affordability metrics. “The number of forced sales should be limited by the high share of fixed-rate mortgages and low peak in unemployment, but a correction in prices looks likely.”

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