The housing market is falling at more than 10 per cent year on year, the most dramatic collapse in the sector's recorded history, the Halifax mortgage bank will reveal this week.
Even in the 1990s, Britain did not face double-digit annual falls in house values. The figures will show the cost of the average UK purchase fell below £180,000 in July, returning prices to mid-2006 levels. That compares with a peak of £199,600 last August.
In June, Halifax forecast house prices would fall by up to 9 per cent this year but its figures will show the annual rate already exceeds that. However, when the bank's parent, HBOS, last week revealed profits hit by provisions against falling property values it admitted the consensus is for prices to fall 15 to 20 per cent during 2008 and 2009.
The market has been hit as the credit squeeze restricts loans to would-be buyers and reduces demand from people reluctant to purchase an asset falling in value. Halifax's former chief executive, Sir James Crosby, told the Government last week that the market will remain mired for at least three years.
Halifax prepares its statistics amid great secrecy and regards them as so stock-market sensitive it will not even confirm when they will be announced to the City.
It now calculates its headline rate by comparing quarterly figures with the same three-month period a year earlier rather than comparing month with month. It claims this method smooths out short-term fluctuations but it has consistently underestimated the rate of fall.
Halifax claimed the annual fall in June was 6.1 per cent, for instance, when house prices were actually 8.9 per cent below June 2007's level. July's headline rate will be suppressed by using the quarterly calculations but the actual fall will exceed 10 per cent for the first time.
The previous fastest fall in house prices was 8.7 per cent in 1992. Between 1989 and 1993 the market fell by 14.7 per cent.
News of the double-digit fall in house prices will be followed by Thursday's key meeting of the Bank of England's interest rate-setting Monetary Policy Committee, which is once again set to keep the cost of borrowing on hold for the third month in a row.
In a Reuters poll of 76 City economists last week, all said they believed the committee would resist any move from the current 5 per cent level.Reuse content