Asking prices for UK homes next year will be slightly lower than they are now according to the forecast offered by Rightmove, the largest online property website in Britain. The expected 1% decline will be the product of higher interest rates and the continued impact of inflation. This time around last year, the prediction was for prices to fall by 2.0% in 2023. However, the decline in the average asking price for a home is 1.3% lower than last year. The lower asking prices will likely be seen as less than a sign of a weaker economy, but more of a needed correction to the housing market’s pandemic boost.

The UK housing market is not to be discounted in its ability to stay resilient. Not Brexit nor a global pandemic could tear it down or hold it back. Even in a global pandemic it not only stayed afloat, but it also left forecasters scratching their heads as they watched their expectations fall like ashes amidst the burning demand in the market. Hopeful home buyers are going to find a way, no matter the short-term challenges that a bump in the economy might bring.

The economic landscape in the UK has been marred by concerns over growth, inflation, and higher interest rates. The governor of the Bank of England, Andrew Bailey, has been vocal about the challenges the UK economy faces, asserting that interest rates are unlikely to be cut in the "foreseeable future." This stance is underlined by a complex web of economic factors, ranging from inflationary pressures to the potential decline in house prices and the need for the Bank to maintain its focus on primary objectives.

The UK housing market is undergoing a significant transformation, marked by fluctuating asking prices and changing dynamics between buyers and sellers. Two prominent property market reports from Zoopla and Rightmove shed light on the current state of affairs, revealing contrasting aspects of the market's health and its responsiveness to external economic factors.

The competition for the attention of borrowers has gotten more interesting. The current standard base interest rate set by the Bank of England’s Monetary Policy Committee (MPC) is at 5.25%. It would be expected that lenders offerings should come in deals above the base rate, but recently remortgage offers have fallen below the Bank’s base rate and that could create a rush to remortgage by homeowners that could benefit. 

Homeowners were facing higher interest rates if inflation did not respond to the efforts by the Bank of England’s Monetary Policy Committee (MPC). In the start of 2023, the inflation rate was double digits, a bit over 10%, having come down from the peak of 11.1% reported in October 2022. The MPC had been fighting to tame inflation since December 2021, and when the peak hit in October 2022, many homeowners were sitting safe in their historically low two-year fixed rate and shielded from rate hikes. Come 2023 and mortgage terms ended leaving homeowners with a choice from much higher interest rates. The same will occur in the year ahead.