The Office for Budget Responsibility’s (OBR’s) forecast for the effective mortgage rate looks
implausibly high, a leading economic research consultancy has claimed.
Last week the OBR said it expects average interest rates on the stock of outstanding mortgages peak at 5% in the second half of 2024.
It is also anticipating a 9% drop in house prices.
But consultancy firm Pantheon Macroeconomics said it expects rates to peak at a much lower level than those projected by the OBR.
It said the forecast was “implausibly high” and said that it expects rates to finish 2024 at 3.7%.
It based its projections on the fact that the OBR forecast was based on Bank of England interest rate expectations in the three working days to October 26th, a time when the markets were still reacting to the failed mini-Budget.
Since then peak base rate expectations have dropped from 5% to 4.5%, while Pantheon reckons it will actually land at 4%.
It also said that the OBR’s expectations of the number of outstanding mortgages which will be refinanced is significantly higher than what the Bank of England anticipates.
Despite its relative positivity about mortgage rates the consultancy is close to being in agreement with the OBR’s house price projections.
While the OBR projects a 9% drop Pantheon said it expects house prices to fall by 8%.
