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UK House Prices Fall for Fifth Straight Month

Reuters
Friday, 28 Mar 2008 | 5:22 AM ET

British house prices fell for the fifth consecutive month in March, bringing the annual rate of increase to its lowest in 12 years, a key survey showed on Friday.

AP

The Nationwide Building Society said house prices fell 0.6 percent this month after a 0.5 percent drop in February -- a clear sign the property market is weakening fast.

Average house prices rose 1.1 percent from a year earlier, the weakest annual increase since March 1996.

The pound fell to an all-time low versus the euro on the back of the weak housing data and a survey that showed British consumer morale fell to its lowest level in more than 15 years.

The euro rose while short sterling interest rate futures rose, following the data.

"The Nationwide data indicate that house prices are continuing to buckle under the substantial pressure emanating from increased affordability constraints and markedly tighter lending conditions," said Howard Archer, economist at Global Insight.

"The current escalation of the credit crunch means that there is an increased risk that a significantly sharper housing market correction could occur," he said.

UK House Prices Fall
The average price of a house in the UK fell for the fifth straight month in March, according to data from Nationwide Building Society. Fionnuala Earley from Nationwide has analysis of the numbers.

On Thursday, three of Britain's biggest mortgage lenders raised some home-loan rates in response to tighter lending conditions stemming from the global credit crunch -- despite the fact the Bank of England's key lending rate has been falling.

The three-month London Interbank Offered Rate has risen to about 6 percent, its highest level this year and 75 basis points above the central bank's base rate.

Nationwide said it now expected house prices to record a modest fall over 2008, in line with a number of other analysts who are also predicting an annual price drop after a decade in which the cost of the average home has trebled.

"A clear change in sentiment since the late summer has led to a sharp slowing in house price growth," said Fionnuala Earley, Nationwide's chief economist.

"A moderate fall in house prices at this stage should not be unwelcome and should help to ensure stability in the market going forward."

Industry mortgage approvals figures released on Thursday were also consistent with further falls in house prices, analysts said, as banks are tightening their lending criteria because of a global credit crunch.

Separately, a Friday survey showed British consumer morale fell to its lowest level in more than 15 years in March as households grew more gloomy about the economic outlook than at any time since the downturn of the early 1990s.

Research firm GfK NOP's consumer confidence barometer slid to -19 in March, the lowest reading since February 1993, from -17 in February.