The UK property market is set to slow as Britain “flirts with recession” and households face a £2,500 jump in mortgage costs, experts have warned, writes Hugo Duncan.
In a gloomy report, the Item Club said it expects house prices to edge up by just 1.1pc this year and 0.6pc in 2027, having risen 2.7pc in 2025.
The economic forecasting group said a squeeze on family finances and a rise in unemployment to over 2.1m will “weigh on housing demand”.
It warned that households refinancing five-year fixed-rate mortgages taken out in 2021 could see their annual bills jump by more than £2,500.
The report came as property website Rightmove revealed the average price of a home coming on to the market fell by 0.6pc or £2,113 this month to £376,191.
It was the biggest June fall in 14 years as “sellers look to entice buyers” by cutting prices in a bid to secure a deal.
Warning that the economy will “flirt with recession later this year”, Matt Swannell, chief economic adviser to the Item Club, said: “An economy that’s under pressure will cause the housing market to lose steam.
“Rising living costs and higher joblessness will prove a brake on housing demand for the rest of this year and into next.”
The group forecast a 0.1pc slide in house prices in London this year and growth of just 0.5pc in the South East.
But more affordable areas will see stronger growth, with prices in the North East of England forecast to rise by 3.7pc, while the North West is up 2.6pc and Yorkshire and the Humber gains 2.4pc.
Tim Lyne, regional economic adviser to the Item Club, said: “The era of London driving the housing market is on hold.
“High prices, weakness in the flat market and landlords leaving the sector are weighing on the capital, while more affordable regions in northern England continue to outperform.”
The report also warned that the amount of mortgage debt written off as households struggle with repayments is set to rise from £129m last year to £190m next year.
But Swannell said: “Households’ balance sheets are still in relatively healthy shape.”
