A leading estate agent, Hamptons, has revised its long-term forecast for house price growth in the UK, citing expectations that interest rates will remain elevated for an extended period, alongside revenue-boosting measures introduced in the recent budget.
This adjustment comes just days after property lenders Halifax and Nationwide reported a slowdown in annual house price growth, with Halifax noting that any growth is expected to remain “modest … for the rest of this year and into next.”
Hamptons’ updated outlook is among the first analyses following the Bank of England‘s recent rate cut, lowering the base rate by a quarter-point to 4.75%.
However, the central bank’s caution that fiscal policies from the budget may drive inflation higher has bolstered predictions that interest rates may not decrease significantly anytime soon.
Hamptons highlighted that “higher [interest] rates for longer will weigh on long-term growth.”
Nonetheless, the estate agent anticipates that house prices will end 2024 with a 3.5% increase over the previous year’s close and projects a 3% rise for 2025.
This forecast upgrade marks a change from Hamptons’ initial projection of a flat market, attributing the adjustment to a quicker-than-expected drop in mortgage rates, with inflation easing faster than predicted.
However, Hamptons has reduced its 2026 growth forecast from 5% to 3.5%, reflecting the expected impact of sustained high interest rates and a relatively weak economic outlook marked by higher taxes and subdued growth.
Hamptons noted that the “new era” of interest rates, expected to hover above 3%, is likely to restrain house price growth.
Aneisha Beveridge, Hamptons’ head of research, commented, “The combined effect of persistently higher interest rates and sluggish economic growth is likely to dampen long-term house price performance compared to previous cycles.”
Nationwide previously reported that annual house price growth slowed to 2.4% in October, following a near two-year high of 3.2% in September.
This trend reinforces expectations that the property market may face ongoing pressure as the UK navigates a higher interest rate environment.
