UK house price crash: Homeowners warned values could plunge by up to 40% in huge blow | UK | News
UK house prices could crash in the UK by as much as 40 percent over the next couple of years in a hammerblow to millions of homeowners, an expert has warned. Shockwaves left financial and currency markets trembling this morning when the pound plunged to an all-time low against the US dollar. Pound sterling nosedived to just $1.0327 – below even the 1985 baseline of $1.0545 – before rallying slightly as the day progressed to close just below $1.07.
The British currency has been on a downward spiral since midday on Friday following Kwasi Kwarteng’s so-called mini-budget where he announced the biggest tax cuts in the past 50 years.
Over the weekend, the Chancellor said more tax cuts could be on the way.
But homeowners could be dealt a huge blow after being warned that unless the Government is able to gain control of the situation, the UK could be heading for a massive house price crash.
Graham Cox, director of Bristol-based Self Employed Mortgage Hub, warned that 1.8million borrowers exiting fixed-rate deals next year “simply won’t be able to afford the mortgage payments”.
He warned: “Unless the Government steadies the ship, we’re heading for a house price crash of 20 to 40 percent over the next couple of years.
“There are 1.8million borrowers coming off fixed-rate deals next year. They simply won’t be able to afford the mortgage payments, forcing them to sell or be repossessed.”
If the pound does not start to recover, the Bank of England will likely make an emergency intervention and massively hike interest rates again – which had already been increased last week from 1.75 percent to 2.25 percent.
But in a massive blow to millions of Britons, this could impact mortgages in what would be a devastating blow for millions of homeowners already feeling the pinch.
In addition, a standard variable rate (SVR) mortgage is now about £132 more expensive per month, according to the latest figures from UK Finance.
Most mortgage holders are on fixed-rate deals, but 1.8million fixed deals are due to end next year, meaning some homeowners could be hit by bill shock when they decide to take out a new mortgage.
Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, said: “Within the mortgage market, more than three-quarters of people are protected by fixed-rate deals.
“However, for anyone whose deal is expiring or on a variable rate, higher rates will add significantly to their monthly costs.”
BoE Governor Andrew Bailey has said the central bank “will not hesitate” to raise interest rates if needed to meet its two percent inflation target.
He said in a statement: “The Bank is monitoring developments in financial markets very closely in light of the significant repricing of financial assets.
“The MPC will not hesitate to change interest rates as necessary to return inflation to the two percent target sustainably in the medium term, in line with its remit.”