Lloyds predicts UK house prices to fall until 2025

Lloyds Banking Group has forecasted that UK house prices will continue to decline in 2023 and 2024, with no signs of recovery until 2025. The lender, which owns Halifax and is the largest mortgage provider in Britain, predicts a 5% decrease in house prices by the end of 2023, with an additional 2.4% drop in 2024. This suggests an 11% decline from the peak prices in the previous year, driven by a rush for larger homes during the pandemic.

In the meantime, banking giant Santander predicts a 7% drop in house prices for 2023, followed by a 2% fall in 2024, with both lenders expecting signs of growth only in 2025.

Lloyds cited an increase in the housing market in previous years and a retracement of those gains in 2023. The lender also reported its finances being squeezed as it paid higher interest rates to savers, with its net interest margin narrowing due to mortgage and deposit pricing challenges.

UK’s largest mortgage provider anticipates a 5% decrease in the current year and a further 2.4% decline in 2024.

Despite these challenges, Lloyds reported a rise in pre-tax profits for the third quarter of 2023. The bank's profits were boosted by a significant decrease in money set aside for potential defaults. Lloyds stated that the number of customers falling behind on mortgage payments was stable, and the growth in defaults had slowed, though it remained slightly above pre-pandemic levels.

Santander also noted a modest increase in customers falling behind on mortgage payments and expected higher interest rates to have a more pronounced impact on households and businesses in the future.

The impact of rising borrowing costs and the level of loans in default are key concerns for investors. Lloyds has been proactively reaching out to customers to offer debt advice and better rates.

This situation reflects a broader trend in the banking industry as lenders reduce mortgage rates while paying more for deposits, responding to regulatory and political pressure regarding interest rate policies.

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