Lloyds Bank has shared its latest predictions on the UK housing market. According to the banking giant, we’re in for a “more modest” tumble in house prices throughout 2024, a slight sigh of relief for many amidst economic uncertainties.
Initially, in September, Lloyds Bank had forecasted a 2.4% drop in average house prices for this year. However, in a twist of resilience and perhaps a glimmer of stability, their annual report released yesterday has fine-tuned this prediction to a slightly lesser decline of 2.2%.
The report highlights an unexpected robustness in the housing market during the latter half of the year, indicating that house prices have held up better than anticipated. This newfound optimism has paved the way for a revised outlook on the future of the housing market.
Future Forecasts
Lloyds Bank have also cast their gaze further into the future, offering a base case scenario where house prices might actually see a turnaround. By their calculations, we could witness a modest 0.5% increase in 2025, followed by a 1.6% rise in 2026, and an even more encouraging 3.5% uptick in 2027. Summarising these projections, the bank suggests an average price growth of 1% from 2023 to 2027.
However, it’s not all rosy predictions. The bank’s worst-case scenario sketches a more daunting picture, with prices potentially falling by 4.5% this year, followed by a 6% decrease in 2025, a 5.6% reduction in 2026, and a 1.7% decline in 2027.
What’s Behind the Shift in Predictions?
The annual report sheds light on some of the bank’s activities over the past year, which might have influenced its market assessments. Notably, Lloyds Bank saw a decrease in loans and advances to customers, including mortgages, which dropped by £5.2 billion in 2023, landing at £449.7 billion.
This reduction includes the securitisation of £2.5 billion worth of legacy retail mortgages in the first quarter and £2.7 billion of retail unsecured loans in the fourth quarter. Despite these movements, when excluding these securitisations, the bank’s loans and advances to customers remained relatively steady.