Autumn Statement: House prices could fall 9% as Stamp Duty relief ends, OBR warns

HOUSE prices are set to fall by 9% over the next two years, a government watchdog has warned.

It comes as the Chancellor revealed in his Autumn Statement that the Stamp Duty relief will end in 2025.

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The Office for Budget Responsibility (OBR) has released its own economic outlook following Jeremy Hunt‘s Budget today.

The OBR, which keeps an eye on the government’s finances and spending, predicts that house prices are forecast will fall by 2024.

This is largely driven by higher mortgage rates as well as wider economic downturn, the report says.

The OBR expects average interest rates on the stock of outstanding mortgages to peak at 5% in the second half of 2024, the highest since 2008.

It will then fall back slightly to 4.6% by the end of 2027.

A spokesperson for the OBR said: “There is significant uncertainty over this forecast given the sensitivity of house prices to mortgage rates and the recent volatility in the bond yields that drive pricing in the mortgage market.”

In today’s Autumn Statement, Jeremy Hunt announced:

• Up to £1,350 in cost of living payments
• Pension triple lock to stay in £870 boost for seniors
• Benefits including Universal Credit and pension credit to rise with inflation
• New work coach requirements for Universal Credit
• Social housing rents to rise 7%
• Freeze on income tax and National Insurance thresholds
• Stamp duty cut to end in 2025
• Typical energy bills to be capped at £3,000
• Minimum wage to rise to £10.42 an hour

Earlier this week, we revealed the areas of the country where house prices are currently falling the most based on data from Rightmove.

Lloyds Banking Group has also told The Sun that it predicts property prices could fall by around 8% in 2023.

House prices have been hit following the disastrous mini-Budget, which saw mortgage rates increase when the markets spooked.

The Bank of England recently increased its base rate from 2.25% to 3% which also had a knock-on effect on mortgage rates.

It has prompted a cooling off in the housing market as people hold off from buying new homes through fear of paying out extra on loans.

The OBR report comes as Mr Hunt also announced today that the Stamp Duty relief will only remain in place until 2025.

Stamp Duty land tax (SDLT) is a lump sum payment you have to make when purchasing property over a certain threshold.

Ex-Chancellor Kwasi Kwarteng announced the cut to Stamp Duty in his mini-budget in September in a bid to boost economic growth.

Before the cut, no Stamp Duty was paid on the first £125,000 of any property purchase.

That’s now double at £250,000 for all home purchases.

Although the Stamp Duty cut was good news for homebuyers, the mini-Budget caused market turmoil pushing up mortgage rates.

Higher loan rates make it harder to get on the property ladder.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, explains that the announcements today could make it even harder on property buyers.

She said: “Right now, the market is sending out every possible signal that they might want to hang fire, because we could be reaching the peak.

“So it will make their decisions even harder now that Jeremy Hunt has warned them if they wait too long, they’ll end up paying more Stamp Duty.”

Sarah goes on to say that by moving from an open-ended stamp duty cut to a limited opportunity, it could hurry through more sales.

While this will help to keep the market ticking over until March 2025, it may not be the best outcome for buyers.

She added: “The desire to save tax could force them to buy sooner than they otherwise would, and expose them to the risk of property price drops.

“Meanwhile, if they decide to hold on for the bottom, they could end up rushing for the end of the stamp duty break along with so many others that they end up paying over the odds.

“Buyers already have incredibly tough decisions right now, and this announcement won’t have made it any easier.”