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We are nine months into a recession that never happened.

The forecast was made by the Office for Budget Responsibility (OBR) in November and revised away in last week鈥檚 Budget.

Only four months ago, Bank of England governor Andrew Bailey said the UK was facing its longest recession on record and unemployment would peak at 6.5%. Last week鈥檚 OBR forecast was 4.4%.

It鈥檚 fair to say that a range of economic indicators are proving better-than-expected and the housing market is no exception, as we noted last week.

It feels like an odd moment for the OBR to increase its forecast for a house price decline by a single percentage point, which it did last week. It now predicts a 10% fall from the Q4 2022 peak.

Mortgage rates

The fact a recession may well be averted, and inflation forecasts also fell in the Budget will only boost sentiment among buyers and sellers.

Five-year fixed-rate mortgages are around 4% compared to 2% this time last year, but the key is the overall sense of stability that has returned. Any rate changes this year will pale into insignificance compared to what took place following the mini-Budget.

If anything, the pressure on rates is downwards as lenders become more competitive in a lower-volume market, as we also explored last week. The OBR said it expected sales volumes to drop 20% from Q4 2022. A future revision to a smaller double-digit decline wouldn鈥檛 be a surprise.

If central bankers adopt a less strident approach to higher rates following the this month, the downwards pressure will intensify. The swap market is certainly pricing in a change of tack, with after the demise of the California-based lender was attributed to aggressive monetary tightening.

In short, a solid start to the year for the UK housing market has been enhanced by an economic backdrop that has become more favourable over the last ten days.

House price pressures

None of which means prices won鈥檛 come under pressure.

There will be a sharp intake of breath among more homeowners as their fixed-rate deals come to an end and more distress will inevitably enter the system, though lenders will be keen to avoid fire sales.

The other reason prices will come under pressure is higher supply, which hasn鈥檛 been a feature of the market since before the pandemic. Demand has been insatiable and supply tight for the last three years, particularly during the stamp duty holiday. It鈥檚 easy to forget that as choice increases, prices may well soften.

The number of market valuation appraisals in the UK, which is a leading indicator of supply, was 16.4% above the five-year average in February, 博鱼体育集团 Frank data shows. Meanwhile, the number of new prospective buyers was 11% higher, suggesting supply outpaced demand last month.

It鈥檚 also true that some sections of the market will suffer more than others.

First-time buyers, who typically have the lowest levels of equity, will be squeezed hardest by higher rates. Demand for a four-bed house may be stronger than a two-bed house on the same street.

Some of them will become tenants, adding to the imbalance that has caused double-digit rental value growth over the last 18 months.

Another positive aspect of the Budget was the absence of measures that could further discourage landlords from entering the sector, which would amplify the imbalance.

That said, policy has been formulated in recent years with zero concern for the laws of supply and demand. If you deter enough new and existing landlords, you will create upwards pressure on rents. Given the size of the recent increases, the economic arguments need to be considered alongside the political capital earned from demonising the buy-to-let sector.

Only last week, we read about .

However, with a general election creeping onto the radar, politics will be in the ascendancy this year, which could be bad news for both landlords and tenants.

There will be a lot more at stake in the next Budget.

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