UK house prices could fall by as much as 20% without causing distress to most homeowners, Bank of England Deputy Governor Jon Cunliffe said.
(Bloomberg) — UK house prices could fall by as much as 20% without causing distress to most homeowners, Bank of England Deputy Governor Jon Cunliffe said.
The BOE does not forecast property prices, but Cunliffe told reporters that homeowners may see “the market falling back from the highs over the last two years,” when cheap money and stamp duty reliefs during the pandemic sparked a mini-boom.
Credit Suisse expects a 10% decline in house prices in 2023, and other City economists also predict large falls.
Speaking to press after the BOE published its Financial Stability Report, Cunliffe said he expected some of Britain’s 2 million buy-to-let owners to sell “and take capital profits” since the vast majority are on interest-only deals and will be hardest hit by rising interest rates.
Those sales “will affect house prices,” Cunliffe said. “But of course, house prices have gone up nearly 20% over the past two years. So, if you think about it, there is a lot of space before you start to see negative equity and distressed sales.”
BOE Governor Andrew Bailey added that “there is nothing easy about the situation we’re in at the moment. We are very conscious of the effects it’s having on households — very conscious of that.”
But he said households are more resilient today than in previous downturns such as the 2008 financial crisis and the 1990s recession as aggregate household debt is lower and servicing costs account for a smaller share of post-tax disposable income.
Banks are also “required by regulation to support their customers through these problems more than they did in the past – they can’t resort to repossession with the speeds that has gone on in the past,” Bailey said.
UK banks have been stress tested against a 30% fall in house prices and have proved resilient.
Read more:
- BOE Says 4 Million Households Face Higher Mortgages in 2023
- Britain’s ‘Jobs-Rich’ Recession May Limit Drop in Housing Market
- Five Charts Show UK Housing Headed for Biggest Drop Since 2008
- UK Home Asking Prices Are Falling at Sharpest Pace in Four Years
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