UK house prices to fall until 2025, predicts Lloyds

Posted on 25 October 2023

Lloyds Banking Group has released a forecast indicating a continued decline in UK house prices for the remainder of 2023 and throughout 2024, with recovery expected only in 2025. Lloyds, the largest mortgage provider in Britain, predicts a 5% decrease in house prices by the end of 2023, and a further 2.4% drop in 2024. This would represent an overall 11% decline in property prices from their peak in the previous year, which was driven by a demand surge for larger homes amid the COVID-19 pandemic.

Santander, another major lender, is even more pessimistic, anticipating a 7% decrease in UK house prices for all of 2023, followed by a 2% decline in 2024. Both banks agree that the first signs of growth in the housing market are unlikely to emerge until 2025, with Lloyds and Santander predicting 2.3% and 2% increases, respectively, in house prices that year. Lloyds' Chief Financial Officer, William Chalmers, acknowledges a softer housing market in 2023 compared to previous years but points out that it's a retracement of the market's prior growth.

In addition to these housing market predictions, Lloyds disclosed that its finances were being affected by higher interest rates paid to savers. The bank's net interest margin, a key factor influencing its income, narrowed from 3.14% to 3.08% in the July to September period, partly due to "expected mortgage and deposit pricing headwinds." Barclays has experienced similar challenges, with its net interest margin also declining, and both banks have faced pressure from regulators and politicians to align interest rate changes for borrowers and savers, as customers increasingly seek better returns on their savings. Despite these financial challenges, Lloyds reported an increase in pre-tax profits to £1.9 billion for the three months to September, although this figure was restated to conform to new accounting rules.