Prices 'to fall 15% in housing hotspots'

Kensington, a specialist mortgage lender, yesterday issued one of the gloomiest predictions yet on house prices, saying the value of homes in property hot spots could fall by as much as 15 per cent this year.

The mortgage lender, which specialises in loans for people rejected by high street banks, said some areas in inner London were most at risk of a fall in property prices.

John Maltby, chief executive, said: "There might be 5 to 15 per cent price deflation in certain areas, but we are not overly exposed there."

The company said it did 77 per cent of its lending in "middle England", on properties valued between £70,000 and £250,000. Mr Maltby said there was "still a shortage of property" in that category. Kensington said it was, nevertheless, taking a cautious approach to lending, and had actually seen a 0.1 per cent drop in bad debts in 2002.

Kensington's profits jumped 21 per cent to £30m in the 12 months to 30 November.

Mr Maltby said: "This house price inflation cannot continue. It is already softening and, while I don't expect a crash, I would think the softening would continue in the second half of 2003."

Kensington said it tried to avoid the most likely bad debts by lending relatively small sums compared to the value of the house being purchased and as a multiple of a customer's income. The company's shares closed up 9.5p to 158p.