The one thing that can pop the house price bubble

The Bank of England has made it clear that interest rates will rise before Christmas. And if there's one thing that can burst the house price bubble, says John Stepek, it's higher interest rates.

Estate agent's window
People care more about their monthly mortgage payment than the absolute house price
(Image credit: © Darren Staples/Bloomberg via Getty Images)

Tucked in amid the Budget documents last week was a note from the Office for Budget Responsibility (OBR) that might have made homeowners shiver. The OBR noted that inflation is rising (they’re sharp-eyed like that). It also noted that in a worst-case scenario, inflation might rise to as much as 5.4% (worst-case... hmmm...).

But, long story short, one thing that might mean is a rise in interest rates. And a rise in interest rates implies more costly mortgages. Which might just imply lower house prices.

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John Stepek

John Stepek is a senior reporter at Bloomberg News and a former editor of MoneyWeek magazine. He graduated from Strathclyde University with a degree in psychology in 1996 and has always been fascinated by the gap between the way the market works in theory and the way it works in practice, and by how our deep-rooted instincts work against our best interests as investors.

He started out in journalism by writing articles about the specific business challenges facing family firms. In 2003, he took a job on the finance desk of Teletext, where he spent two years covering the markets and breaking financial news.

His work has been published in Families in Business, Shares magazine, Spear's Magazine, The Sunday Times, and The Spectator among others. He has also appeared as an expert commentator on BBC Radio 4's Today programme, BBC Radio Scotland, Newsnight, Daily Politics and Bloomberg. His first book, on contrarian investing, The Sceptical Investor, was released in March 2019. You can follow John on Twitter at @john_stepek.