House prices will fall by as much as 15% in the next two years as rising interest rates erode buyers’ spending power, economists have warned.
The analysis, from Capital Economics and investment bank Credit Suisse, is based on the assumption that interest rates will rise to 6%, in line with predictions made by the financial markets.
Many mortgage lenders have already put up rates, or have halted lending, with nearly 300 deals pulled in a single day.
Enquiries by new buyers are at their lowest level since the financial crisis in 2008.
Andrew Garthwaite at Credit Suisse said: “On current swap rates, the [average] mortgage will be 6.3%. House prices could easily fall 10% to 15%.”
