Halifax predicts zero house price growth in 2008

LONDON (Reuters) - The housing market will stagnate in 2008 with house prices failing to rise for the first year in more than a decade, the country's biggest mortgage lender Halifax said on Friday.

HBOS HBOS.L, owner of Halifax, said annual house price inflation would fall to zero next year, even if interest rates were to fall to 5 percent.

However, it said high employment and sound economic fundamentals would prevent widespread house price falls of the type seen in the early 1990s. Rather, the number of property transactions would bear the brunt of the slowdown, falling by 15 percent in 2008.

Earlier this week Halifax reported house prices fell for a third month running in November -- the first time this has happened since 1995.

Evidence of a slowing economy and a fast-cooling housing market prompted the Bank of England to cut interest rates to 5.5 percent this week. The Halifax forecast is based on two further quarter-point rate cuts during 2008.

Its take on the housing market is similar to that of other major lenders.

The Nationwide building society is also plumping for zero house price growth while the Council of Mortgage Lenders is forecasting house price inflation will slow to one percent. Derivatives contracts show investors are betting on falls of up to eight percent.

Regionally, Halifax is forecasting modest house price growth in southern England and Scotland, and small house prices falls in northern England and the midlands.

(Reporting by Christina Fincher; Editing by Ruth Pitchford)