The bank, which is Britain’s biggest mortgage lender, has said the economic fallout caused by coronavirus pandemic would catch up with the property market in 2021, after an unexpected boom during the restrictions. 

The bank is forecasting a fall in house prices of between 2% and 5% for the year as a whole.

Halifax has said the impact of the COVID crisis on household finances had been delayed by the furlough scheme, but that the reduction of support next year will cause unemployment would rise. Such conditions will increase pressure on the housing market after dramatic increases in 2020.

Russell Galley, the managing director at Halifax, said: “While the economy should begin to recover in 2021, helped by the roll-out of Covid vaccines, unemployment is expected to rise. With the stamp duty holiday also due to expire in March housing market activity is likely to slow.”

The housing forecast arrives as the UK economy is under increased pressure from a new strain of COVID-19, stricter lockdown restrictions and upheaval at the UK’s border just days before the end of the Brexit transition period, The Guardian reports.

Robert Jenrick, UK housing secretary, said sales and rental markets would remain open in tier-4 areas across London and the south-east. However, analysts increasingly warn of a short-term crash in house prices in 2021.

The Office for Budget Responsibility (OBR) has estimated that house prices will drop more than 8% next year before experiencing a rapid recovery in 2022.

The OBR expects a boom in transactions before the end of the stamp duty holiday, as buyers rush to avoid the deadline. Sales volumes are then expected to fall drastically, exacerbated by rising unemployment after the end of the furlough scheme in April.

However, Halifax said declines of up to 5% would only partly remove average growth in house prices of £18,000, or 7.6%, over the past year. It said that prices were still out of reach for many first-time buyers.

Mr Galley added: “House prices have risen over the past year at their fastest rate since 2016, with mortgage approvals also at their highest level for over a decade. This growth has been driven by a shift in demand from buyers as a result of increased home working and a desire for more space.”