London residents were today warned of a crash that may slash the value of their homes by 20% if mortgage rates remain high.
Property analysts are growing increasingly concerned about an impending “tipping point” that will send the market into freefall if the Bank of England does not halt interest rate hikes.
So far, the market has proven extraordinarily durable in the face of 13 rises from the Bank’s Monetary Policy Committee, which have raised the cost of borrowing from 0.1% in December 2021 to 5% currently.
According to the Halifax, Britain’s biggest lender, prices fell only a relatively modest 2.6 per cent in the year to June.
But the next decisions on rates in August and September are seen as crucial in determining whether the market can continue to subside gently in a “soft landing” or start to plummet.
Nearly a million fixed-rate mortgages, including approximately 100,000 on London residences, must be refinanced before the end of the year, exposing homeowners to harsh repayment increases at a time when budgets are being strained by the cost-of-living issue.
Just a few days ago, the Bank of England warned that tens of thousands of Londoners will face annual mortgage increases of more than £12,000 by 2026, with many more facing increases of at least £6,000, showing how vulnerable the capital is to interest rate increases, which might lead to property price reductions.