House prices set to fall by 9%, OBR warns

House prices are set to fall by nine percent over the next two years, driven by higher mortgage rates and the economic downturn. This is the prediction from the Office for Budget Responsibility after Chancellor Jeremy Hunt’s Autumn Statement in the House of Commons today.It marks a reversal in a trend which saw house prices rise by 15.5 percent in the year to July.The OBR added that average interest rates on the stock of outstanding mortgages are expected to peak at five percent in the second half of 2024, the highest level since 2008.Chair of the OBR, Richard Hughes, said: ‘Rising energy prices, inflation, and interest rates [that] have taken the wind out of a UK economy which had not quite regained its pre-pandemic level and tipped it into a recession we expect to last just over a year from last quarter.’This latest prediction could spell bad news for buy-to-let landlords. With interest rates and the cost of borrowing continuing to rise at the same time as the cost-of-living crisis, it makes repairs and maintenance works more expensive. House price crash: Jeremy Hunt delivered his Autumn Statement in the House of Commons today (Image: GETTY) The Office for Budget Responsibility is predicting a nine percent drop in house prices (Image: Officer for Budget Responsibility)‌In Mr Hunt’s Autumn Statement he announced increased taxes and spending cuts to fill a £50 billion fiscal black hole.Mr Hunt also lowered the 45p tax rate from the existing £150,000 to those earning £125,140.He told MPs that the stamp duty cuts previously announced in Kwasi Kwarteng’s mini-budget will stay but only until March 31, 2025.The Chancellor said: ‘After that I will sunset the measure, creating an incentive to support the housing market and all the jobs associated with it by boosting transactions during the period the economy most needs it.’READ MORE: ‘Like a smiling assassin Hunt quietly imposed biggest tax rise ever’ Chancellor Jeremy Hunt pictured leaving 11 Downing Street for the House of Commons (Image: PA)The mini-budget changes raised the general threshold at which stamp duty applies from £125,000 to £250,000, lifting around 200,000 more people every year out of paying stamp duty, according to previous Government calculations.First-time buyers, who already paid no stamp duty on the first £300,000 of the price of a property, saw the threshold raised to £425,000.Speaking earlier today Mr Hunt said: ‘Unfunded tax cuts are as risky as unfunded spending. The Government and the bank [will need to be] working in lockstep’ in order to pull Britain out of a vicious economic downturn.‌The decreased worth of housing is happening in parallel with increasing demand due to low housing stock and a lack of incentives to build.This will make it increasingly difficult for first-time buyers.DON’T MISSBrace yourself for a truly grim couple of years – budget analysis [ANALYSIS]Martin Lewis gives mortgage news that ‘isn’t printed anywhere’ [INSIGHT]Capital gains tax raid may ‘paralyse’ housing market [REPORT] House prices are expected to drop by nine percent (Image: Getty)Richard Donnell, executive director of research at Zoopla, said: ‘The Government’s announcement of a reversal of the recently announced stamp duty changes in 2025 signifies a real need to reform stamp duty – a tax that is now starting to resemble income tax where it’s the top tax bands generating the greatest receipts.’This reversal will make it increasingly difficult for prospective first-time buyers to get on the housing ladder in the coming years, particularly in London and the South East which account for the majority of stamp duty receipts.’Inflation is 11.1 percent which is the highest level since 1981.But Mr Hunt’s Autumn Statement did include some measures to help people with rising interest rates.‌In a tweet HM Treasury said: ‘To help people with rising interest rates, homeowners on Universal Credit will be able to apply for Support for Mortgage Interest loans after 3 months instead of 9 months, including those in employment.  This will come into effect in Spring 2023.’