Owner of Halifax, Lloyds Banking Group, projects that prices will fall by 2.4% in 2024 and 4.7% this year, respectively, before rising.
Lenders have attributed a downturn in home sales to increased borrowing costs.
However, average home prices are still around £40,000 higher than they were during the peak of the COVID-19 pandemic, when demand for more space drove up prices.
Lloyds announced on Wednesday that although costs will decline in the next two years, they would climb steadily over the long run, increasing by 0.6% by 2027.
Due to a series of rate increases intended to combat skyrocketing borrowing costs, interest rates are currently at 5.25%, the highest level in 15 years.
Lenders have increased their borrowing rates as a result, including for mortgages. Financial information service Moneyfacts reports that the average rate on a two-year fixed is 6.24% based on the most recent data.
The Halifax House Price Index, which does not include data for cash buyers—who currently account for more than 30% of all home sales—is the basis for Lloyds’ projections.
In the UK, the average cost of a home continues to be high even if data from mortgage lenders indicates a decline in housing prices.
The average home price in the UK in August of this year, based on completed transactions, was £291,044, according to the UK House Price Index. This represents minimal change from a year ago.
The company that owns Halifax and Bank of Scotland, Lloyds, also released a projection for house prices along with its trading statement, which showed the company had made enormous profits and was still benefiting from rising interest rates.
Pre-tax earnings for the three months ended in September increased to £1.9 billion for the banking business from £576 million in the same time the previous year.