House prices gloom

THE Halifax Building Society, Britain's biggest mortgage lender, is expected to slash its influential forecast that house prices will rise by 2 to 3 per cent this year, writes Antonia Feuchtwanger.

According to Gary Marsh, the society's economist, if the number of house sales fails to increase from its present depressed level, the forecast will have to be reviewed. And recent indicators of mortgage commitments suggest that activity is not going to pick up.

As home-owners prepare this weekend for the start of the spring buying season, the prospect of a cut in Halifax's forecast will dash many sellers' hopes. The Halifax's house price index for February showed that prices were 1.5 per cent lower than a year ago, though the society had been assuming a better second half to the year.

Many housing market experts say hopes of rising prices are creating false expectations and preventing transactions from taking place.

These expectations keep properties off the market as sellers hope for better days and encourage the 1.2 million households in negative equity to wait for an improvement.