November 6, 2008 / 9:11 AM / 11 years ago

House prices fall at record rate in October

LONDON (Reuters) - House prices fell at their sharpest rate in at least a quarter of century in October, raising expectations the Bank of England will deliver a big interest rate cut on Thursday to stave off a severe recession.

Property sale signs are seen in west London, October 2, 2008. REUTERS/Toby Melville

Britain’s biggest mortgage lender, Halifax, said house prices fell 2.2 percent in October, the ninth successive decline. That took house prices down 14.9 percent compared with a year ago, the steepest fall since records began in 1983.

The figures, published just hours before the Bank of England announces its latest interest rate decision, boosted expectations policymakers would slash borrowing costs by more than half a percentage point.

“The Halifax numbers are horrendous,” said George Buckley, chief UK economist at Deutsche Bank. “They support our view the Bank of England will cut interest rates by 100 basis points today.”

Even a cut of that magnitude may not bring much immediate comfort to struggling homeowners as banks have been reluctant to cut their mortgage rates in line with official rates because of the deepening credit crunch in financial markets.

Earlier this week, mortgage lender Abbey announced it was raising rates on some home loans and HSBC has said it expects some “stickiness” by banks in passing on forthcoming rate cuts.


Prime Minister Gordon Brown has urged banks to pass on any interest rate cuts to consumers, but economists say lower rates will not be enough to halt a slide in the housing market.

Halifax reckons house prices have fallen 15.7 percent from their peak, meaning that hundreds of thousands of homeowners may already be in negative equity — where their mortgage exceeds the value of their home.

“This housing market correction has already overtaken the 1990s crash and, with the economic slump deepening, it is set to get worse,” said Sheema Shah, property economist at Capital Economics. “Interest rate cuts will not be enough to stop the correction, nor slow the pace of house price declines.”

Construction firms are already suffering the effect of the housing market slump. Housebuilder Bovis Homes Group Plc said discounting in the face of tough market conditions had hit its profit margins.

And official data on Thursday showed new construction orders fell 19 percent in the three months in September compared with a year ago, with orders for private housing 53 percent down in that period.

Additional reporting by Christina Fincher; Editing by Toby Chopra

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below