Data from the Office for National Statistics (ONS) has confirmed that the UK economy officially entered into a recession at the end of 2023.
The figures from ONS showed that the economy contracted by 0.3 per cent in the final three months of the year.
Most economists were forecasting a 0.1 per cent decline in the gross domestic product (GDP) between October and December.
The 0.3 per cent dip means the UK has dipped into a technical recession, defined by two or more quarters in a row of falling GDP.
The UK previously entered a recession in the first half of 2020 due to the Covid-19 lockdown that sent the economy plunging into reverse.
Before 2020, the Great Recession of 2008 saw a global financial crash riven by the housing market crash in the USA before it hit the UK in late 2007.
Now, as the UK entered a new recession, some are concerned about how it could affect the housing market and mortgage rates.
How does a recession affect house prices?
House prices can be affected by recessions depending on how severe they are.
Previous recessions have shown that house prices often fall during a prolonged economic dip and rise in unemployment.
According to estate agents Petty Son & Prestwich, they share that ” an economic downturn can have a negative impact on [property] value.”
They added that areas with high property interest, like London or Manchester should continue to be fine, however “less desirable localities will struggle.”, sharing: “While even the most favoured locations can still be hit by a long-standing recession, its impact is likely to be less dramatic.”
What happens to mortgage rates in a recession?
A recession typically means that interest rates will fall to make it easy to borrow money and credit in a way that should help encourage spending.
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But, according to Tembo Money, as the “cost of borrowing is reduced, banks and building societies may also lower their own interest rates, too. This means mortgage rates should go down in a recession, making getting a mortgage or remortgage more affordable.”
What does a recession mean for first-time buyers?
Many first-time buyers may believe that getting onto the property ladder is easier during a recession.
However, this often depends on how long a recession lasts, as some do not last long enough to impact the property market in a significant way.
