House price fall fastest for 15 years

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The Independent Online

House prices are falling at their fastest rate since the 1990s house price crash, losing 6.1 per cent of their value during the past year, Britain's biggest mortgage lender said today.

The average property price dropped by 2 per cent during June, following a slide of 2.5 per cent in May, to stand at £180,344, according to Halifax.

The annual rate at which prices are falling continued to accelerate during the month, increasing to 6.1 per cent, the highest level since March 1993 and up from 3.8 per cent in May.

House prices have now fallen by a total of 8.9 per cent so far this year, dropping in eight of the past 10 months.

Halifax said the average home now cost the same as in August 2006, although prices are still 2 per cent higher than two years ago and 40 per cent higher than five years ago.

Today's figures are in line with those reported by Nationwide Building Society last week which showed that house prices fell for the eighth month in a row during June, dropping by 0.9 per cent.

At the same time annual house price growth fell to minus 6.3 per cent, the lowest level since December 1992.

All the major house price indexes are now showing falls, with economists predicting prices will drop by up to 12 per cent this year.

The market is also unlikely to receive a boost from the Bank of England's Monetary Policy Committee in the near future.

The MPC, which announces the results of its two-day interest rate setting meeting today, is widely expected to keep the official cost of borrowing on hold at 5 per cent due to inflationary pressures.

But despite the current turmoil, Halifax said the housing market continued to be underpinned by strong fundamentals.

It said price falls were being driven by affordability problems due to rapid house price growth in recent years, combined with a squeeze on consumers' spending power and the problems people were having getting mortgages as a result of the credit crunch.

But it said employment levels remained high, interest rates were low and the shortage of new homes being built would support valuations.

The group added that the drop in prices of 2 per cent during June was a "slight moderation" from the fall of 2.5 per cent in May.

Howard Archer, chief UK and European Economist at Global Insight, said: "The latest data on the housing market continue to be very worrying, and there appears to be no let up in the current downward spiral.

"Clearly, the downward pressure on house prices coming from very low activity, stretched buyer affordability and tight lending continues to bite very hard."

He said Global Insight had now increased its forecast for house price falls to 15 per cent for this year, followed by 12 per cent in 2009, meaning prices will have dived by 26 per cent from their August 2007 peak by the end of next year.