By using this website, you agree to our use of cookies to enhance your experience.
Graham Awards


Interest rate rise delay would "unleash major house price surge"

A leading bank is forecasting that if interest rates do not rise next year - as some experts predict - then there will be massive house price increases.

These would be 6.7 per cent on average in 2016 and an eye-watering 11.5 per cent the following year.

BNP Paribas Real Estate says that if there is no rate rise until late 2017 then the average UK home would cost £235,500 by that time, after two high annual price rises. It also warns there would be a boom in credit and sharp rises in GDP and inflation, increasing pressure on the Bank of England to restrict mortgage finance.


However, if there is an interest rate rise next year then average house price growth would be slower, at 4.4 per cent in 2016 and 6.9 per cent the year after, to end 2017 at £220,116.

Over the longer term the average UK house prices to rise 27 per cent to £250,000 by 2020 with the strongest growth seen in south west England - up a resounding 40.2 per cent in that period - and in parts of the south east, up 36.1 per cent.

The bank also says that stamp duty announcements made in George Osborne’s Autumn Statement would reduce average house price growth in London from its current 5.6 per cent to 4.7 per cent in 2016

“While on the face it a deferral would be good news for home owners, we believe this scenario is a cautionary tale for the UK economy as a whole. There is already concern at the Bank of England over the pace of house price growth and while the current lack of housing supply is a significant driver, the sustained low cost of finance is also a major contributor” says  Adrian Owen, Head of Residential at BNP Paribas Real Estate.

“The disparity in prices across the regions of the UK continues to grow, with the North East, Scotland, Wales and Northern Ireland showing less ongoing demand. However, we expect the Midlands and the non-London south to play a degree of catch-up with London where, following its outperformance for so many years, prices are forecast to grow slightly below the national average” he says.

  • Algarve  Investor

    "A leading bank is forecasting that if interest rates do not rise next year - as some experts predict - then there will be massive house price increases."

    Just what we need - house prices going even further out of reach for everyone bar the super-rich. Great.

  • Brit Sixteen Sixty Four

    We have already had massive house price increases due to 0.5% trillions in QE worldwide and funding for lending. Don't people realise that cheap credit keeps creating these housing bubbles.

    Far better to place house prices back in the inflation figures (RPI) and raise interest rates when it starts to rise above normal inflation.

  • Jonathan Rolande

    The SDLT changes due in April will reign in prices at least for a while.

  • Anna  Dickson

    The government keeps looking for ways to improve the current housing system, but so far they have failed to come up with a housing strategy which provides for the needs of the buyers AND the renters.

    Hopefully the doubling of the funding for the Right to Buy scheme will help buyers get a foot on the ladder, but with house prices predicted to rise astronomically, it's as if prospective buyers are going around in circles. They are given something with one hand, yet it gets taken away with the other.

  • Peter Hendry

    The government could improve the situation by smoothing the marketplace out, simply by removing the main hazards encountered by anyone wishing to buy or sell as well as to let a property out or to rent one.

    For full information about precisely what needs doing Google The Hendry Solution.

    This is a cost neutral solution.


Please login to comment

MovePal MovePal MovePal
sign up