But Pantheon said that the OBR’s new prediction was “implausibly high”.
It added: “We think the OBR is being a bit too gloomy. On close inspection, we think it has overestimated the size of the hit from mortgage refinancing next year.”
Pantheon said that the new forecast was based on markets’ Bank Rate expectations in the three working days to October 26 – when markets were still reeling from the fallout from the mini-Budget.
Investors have since revised down their expectations for the peak in the Bank Rate from 5pc to 4.5pc. Pantheon has forecast an even lower peak at 4pc – up from 3pc today.
The OBR’s forecast also implies that nearly one in five outstanding mortgages will be refinanced every three months. Bank of England data shows that the figure is closer to 7pc – or one in 14 loans, Pantheon said.
Based on the slower rollover of loans and a lower Bank Rate peak at 4pc, the effective rate on outstanding mortgage loans will peak at only 3.3pc by the end of 2023 and 3.7pc by the end of 2024, Pantheon said.
A smaller increase in mortgage rates will in turn reduce the damage to real household disposable income.
The OBR has forecast a record 4.3pc drop in disposable incomes per person this tax year, which will be the largest since ONS records began in 1956. This will be followed by a 2.8pc drop in the next tax year – the second largest fall and only third time the measure has fallen for two consecutive tax years.
Pantheon by contrast, has forecast a smaller 2pc drop in disposable incomes next year.
But this will not be enough to save house prices from falling. Even accounting for the more positive mortgage forecasts, Pantheon expects house prices to fall by 8pc – only marginally less than the 9pc drop predicted by the OBR.
The OBR did not respond to a request for comment.
