UK house prices will rise by almost 25 per cent over the next five years as mortgage rates continue to fall, according to Savills.
The estate agency predicts house prices will increase 4 per cent in 2025, or £14,500, and by 23.4 per cent, or £84,000, in the five years to 2029 due to lower inflation and a decrease in interest rates.
“With less external noise, house prices in the medium term will be dictated by the fundamentals of demand, supply and affordability,” says Lucian Cook, head of residential research at Savills.
“The direction of mortgage rates has been key to buyer decisions over the past two years, and decreased monthly mortgage costs are now feeding through into improved confidence amongst prospective buyers.”
Savills says markets in the North, where mortgaged buyers are under less strain, will have the strongest acceleration in growth of between 28 and 29 per cent by 2029.
Cook adds: “A steady improvement in affordability should allow for house-price growth to gain momentum over the next couple of years. But there is still some potential for a bumpy ride.
“The market will remain sensitive to short-term fluctuations in the cost of debt.”
The estate agency says the rise will take inflation-adjusted house prices back to where they were before the mini-Budget in 2022, which caused mortgage rates to spiral and dented the housing market.
The findings come after the average price of a home rose by much less than expected in October, with buyers and sellers expressing caution ahead of last month’s Budget.
Across Britain, the average asking price for a property increased by 0.3 per cent month-on-month, or £1,199, to reach £371,958, Rightmove said.
The website said October is usually one of the busiest months for the UK property market, with asking prices rising by 1.3 per cent on average.
Tim Bannister, Rightmove’s director of property science, said: “October’s subdued price growth comes as buyer choice soars to a level not seen since 2014. With the ball in the buyer’s court and a big crop to choose from, sellers need to be pricing competitively to find a buyer.
“Some estate agents reported that movers were also waiting for Budget clarity and anticipated cheaper mortgage rates later this year.”
The Chancellor, Rachel Reeves, delivered her Budget on 30 October, with many concerned that Labour’s policies would be a dampener for the UK property market.