Big house price fall in 2023 then years of stagnation - forecast

House prices will fall by 7.9 per cent next year and then will effectively stagnate until 2027 according to a gloomy forecast from the Lloyds Banking Group, which owns the Halifax.

The company is the UK’s largest mortgage lender and has set aside £668m to cover bad debts which it anticipates as rising interest rates make loans and mortgages less affordable.

Although the firm has announced pre-tax profits of £1.5 billion in the third quarter of the year, this remains 25 per cent down on the same period last year.

The group is hinting that it is already being more selective on its lending criteria. "So far at least, our customers are proving to be resilient and adapting well to the cost-of-living increases that we have seen” says Lloyds’ chief financial officer, William Chalmers. 

But he continues: "We are deliberately ensuring that we lend to customers who are best placed to withstand potential future stresses on the macro level and in their own personal circumstances."

The 7.9 per cent house price fall is the likely-case scenario put forward by Lloyds - it’s worst-case scenario sees house prices falling overall by approaching 18.0 per cent. And the banking group says the UK economy as a whole will shrink by 1.0 per cent next year according to its likely-case analysis - the worst case is a huge 4.5 per cent shrinkage.

Lloyds attributed its profits fall to the deteriorating economic outlook with inflation hitting at 40-year high in October, although it said it was only seeing “very modest evidence of deterioration” in its credit performance at present.

“The current environment is concerning for many people and we are committed to maintaining support for our customers” chief executive Charlie Nunn told shareholders in a trading statement.

Few of the major estate agencies and property analysts have yet released their forecasts for 2023’s housing market.

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