For decades, economists have relied on a simple rule: when you measure something, you can predict it. Feed the data into the model, run the numbers, get your forecast. Clean. Logical. Reliable.
Except it doesn't work anymore. And if you're thinking about buying, selling or remortgaging a property, this matters more than you might think.
The rule that ruled economics
The principle in question is known as Goodhart's Law, named after British economist Charles Goodhart who turns 90 next month. In its simplest form, Goodhart observed something profound: the moment a measure becomes a target, it stops being a reliable measure.
Think of it this way. If a government decides to keep inflation at 2.9% (our current CPI rate), and central banks start using that target to guide everything from base rates to long-term policy, the relationship between inflation and other economic variables begins to shift. The tool itself distorts the system it was designed to monitor.
For property buyers and sellers, this has real implications. Mortgage pricing, interest rates and house price forecasts all rest on economists' ability to predict inflation and central bank behaviour. When the old models stop working, certainty evaporates.
Why forecasts keep missing their mark
The Bank of England's base rate sits at 3.75%. Most economists predicted rates would be lower by now. Two-year fixed mortgage rates hover around 6.58%, and five-year fixes at 4.92%, partly because lenders aren't convinced about the Bank's inflation forecasts either.
This uncertainty isn't just academic hand-wringing. It directly affects you. When banks can't confidently predict where rates are heading, they price mortgages conservatively. That means higher rates for borrowers and more expensive borrowing when you're trying to get onto the property ladder or refinance an existing deal.
Over the past decade, economic models have repeatedly failed to anticipate major shifts: the persistence of low inflation after 2008, the speed of recovery post-pandemic, the sticky inflation that arrived in 2021 and 2022. Each time, policymakers adjusted their targets. Each adjustment made the old models less reliable.
What this means for the UK property market
The UK average house price stands at £272,188, up just 2.0% annually. That's hardly the robust growth we saw in earlier decades. Part of the reason for this modest movement is genuine caution among buyers and sellers about what comes next.
When economists can't reliably forecast interest rate paths, property decisions become harder. Should you lock in a five-year mortgage rate now, betting that rates won't fall? Or wait and hope for better terms, risking that rates climb further? Sellers face similar paralysis. Listing at today's prices when you're unsure whether the market will soften or strengthen feels risky either way.
This uncertainty isn't new, but it's intensified. Traditional models that worked well for 40 years are showing their age. Central banks are now running multiple forecasting scenarios simultaneously because no single model inspires confidence anymore.
The practical takeaway for homeowners
Goodhart's insight reveals something uncomfortable: perfect forecasting was always an illusion. Accepting that doesn't paralyse you, though. It should actually inform better decisions.
For those considering a mortgage, focus on what you can control. A 5.92% five-year fixed rate offers genuine protection against further rises, even if rates eventually fall. Yes, you might pay more than necessary in hindsight, but you eliminate the worst downside risk. That's valuable when forecasts are unreliable.
For sellers, pricing strategically matters even more when the market lacks clear direction. Homes priced reasonably attract motivated buyers regardless of economic backdrop. Overpriced properties languish.
First-time buyers should resist the temptation to time the market perfectly. You won't predict rate movements better than professional economists, and frankly, neither will they. Instead, buy when you find the right property at a price you can afford, on a mortgage rate you can manage.
The old certainty about how economies work has genuinely eroded. But that's not actually bad news for property decisions. It's permission to stop waiting for perfect clarity and to make choices based on your actual circumstances instead.