Economists warn that house prices will not rebound after the current slowdown unless interest rates come down dramatically.
Home loan borrowers will continue to face the highest mortgage costs in a decade, and this will hold any recovery back, according to S&P Global Ratings, the Daily Telegraph reports.
S&P warned that the value of homes will fall by 12% by the end of next year, saying there was “little prospect” of a recovery.
“There is still some time to go before mortgage pain reaches its peak.”
UK house prices will fall by 6.6% in 2023, and then by a further 4.9% next year, the credit rating agency says.
S&P expects the market will stagnate in the next three years, with price growth of just 1.4% and 3% in 2025 and 2026.
“There is still some time to go before mortgage pain reaches its peak,” S&P says.
The gloomy forecast comes despite a lower inflation figure announced this week, with a fall from 8.7 to 7.9% in June.
Meanwhile, NatWest says it will increase mortgage rates despite the lower inflation figure, and hopes of price reductions.
The bank said it will raise some fixed rate deals by up to 0.3% from today.
There are some predictions that the Bank of England may slow interest rate rises now inflation has come down. But the Government is still well short of its inflation target of 2%.
Andrew Wishart, senior property economist at Capital Economics, says: “The lower-than-expected CPI inflation data for June probably signals the end of the upward march in mortgage rates.
“But mortgage rates are likely to plateau rather than fall as the Bank of England keeps interest rates high until next summer and lenders rebuild their margins.”