The Office for Budget Responsibility (OBR) believed there will an average decline of house prices of 10% this year.

📊💼 The Impact on the UK Economy🌎📉:

1.     Falling house prices can have an adverse effect on the banking and financial sector. Falling house prices mean banks will lose money if people default from their mortgage payments – an increasingly likely scenario in the UK has mortgage rates spike at 6%. Consequently, these bank losses lead to lower bank lending and lower investment.
2.     In theory, a fall in house prices would cause first-time buyers to require a smaller deposit and as a result, it becomes easier to buy. With less needed to save for a deposit, first-time buyers may be able to spend more on other goods.
3.     When house prices are falling rapidly, there is a negative wealth effect. This means that as consumers see a fall in their main asset. This decline in wealth causes lower spending and higher saving.
4.     Many households may become trapped in ‘negative equity’. Negative equity occurs when the value of the house is less than the price they paid for it. As a result, negative equity discourages people from borrowing and encourages them to save. Consequently, consumer spending will fall which may lead to a negative multiplier effect.