House prices set to fall by 10 per cent - and may not get back on track until 2026, watchdog warns

Drop even larger than forecast in November as incomes squeezed and mortgage rates expected to rise again

House prices are set to fall by 10 per cent against their peak late last year, the government’s fiscal watchdog is forecasting.

Low consumer confidence, the squeeze on real incomes and the expectation of mortgage rate rises to come will combine to cause the drop, according to the Office for Budget Responsibility (OBR).

But prices will start rising again in 2026, the OBR experts predicted, as chancellor Jeremy Hunt unveiled his spring Budget, in which he said the UK would avoid falling into a recession.