Estate agents have warned how house sales are already collapsing with lenders pulling mortgage offers in reaction to the Mini-Budget.
Soaring mortgage costs are set to hit the two million families on a variable deal over the next few months - with many fearing that they may be forced to sell up as a result.
The property market was left in turmoil this week following the Mini-Budget - which also sent the pound plunging to an all-time low against the US dollar.
Banks and building societies pulled 1,000 deals from the market in 24 hours after analysts warned interest rates could hit 6% next year - sparking more misery for homeowners.
Interest rates are currently at 2.25%. When rates rise, this affects everyone on a tracker mortgage, with standard variable rate (SVR) deals usually impacted as well.
It is down to your lender to decide whether it puts up your SVR deal - and most do decide to do this.
Property experts are now warning of a 15% or 20% fall in house prices, if there is a decline in demand, which would slash around £58,000 off the average property price.
For buyers, affordability may become an issue - as they will need to prove that they can afford repayments if mortgage rates hit 7% next year.
North Wales estate agent Ian Wyn-Jones told BBC Radio 4: “What I’ve seen in the last 24 hours, a lot of my clients’ mortgage offers have been pulled, properties have collapsed in terms of the sales, chains have collapsed, it’s wiped a lot of cash from the pipeline.
“It doesn’t look good at the moment. We had about four properties yesterday where lenders just pulled their offers.”
Graham Cox, director of the firm Self Employed Mortgage Hub, told The Guardian that falling prices could be inevitable unless inflation falls.
He said: “Unless we are very lucky and inflation falls much more quickly than predicted, I don’t see any other outcome than a sizeable fall in house prices – possibly 20%-plus over the next two to three years.
“I’ll be accused of being a doom-monger, but if you use simple maths and common sense, how can house prices not fall?”
In a dramatic week for the UK economy, the Bank of England was forced to step in yesterday, and said it will start buying up bonds.
The central bank said the emergency move was to avoid a “material risk to UK financial stability” and calm markets.
When central banks buy their country's own bonds - a sort of debt - interest rates tend to fall.
It was later warned that pension funds faced "mass insolvencies" without action from the BoE.
The chain of events started after the pound plunged - dropping to $1.03 on Monday - in the wake of Chancellor Kwasi Kwarteng ’s Mini-Budget last week.
Some of measures announced include abolishing the higher rate 45% tax bracket for the most wealthy, along with reversing the 1.25 percentage point National Insurance hike.
The International Monetary Fund (IMF) has urged the UK Government to reconsider its plans for tax cuts over fears it could drive up inequality and put more pressure on prices.
Meanwhile, the Bank of England has said it won't hesitate to change interest rates “by as much as needed” to get inflation - which currently sits at 9.9% - under control.
Mr Kwarteng is expected to set out medium-term debt-cutting plans on November 23.
This will also include forecasts from the independent Office for Budget Responsibility of the full scale of Government borrowing.
