U.K. Home Prices Drop By the Most Since 1995, Nationwide Says

Discussion in 'Economics' started by ASusilovic, Nov 29, 2007.

  1. Nov. 29 (Bloomberg) -- U.K. house prices plunged the most in 12 years this month, suggesting Britain's property market is starting to slump after a decade-long boom, Nationwide Building Society said.

    The cost of a home dropped 0.8 percent from October, the biggest monthly decline since June 1995, to 184,099 pounds ($381,000), Britain's fourth-largest mortgage lender said today. Annual house-price increases slowed to 6.9 percent from 9.7 percent in the previous month, the report showed.

    Nationwide predicts house prices will stagnate next year after gaining as much as 8 percent in 2007 as borrowing costs at a six-year high and a slowdown in economic growth curb demand for homes. Contagion from the U.S. subprime mortgage market collapse is also prompting lenders to tighten credit standards, exacerbating the downturn.

    ``Poor affordability, weaker house-price growth expectations and the effect of earlier increases in interest rates have all affected demand,'' said Fionnuala Earley, chief economist at Nationwide. ``There are uncertainties in the market, not least from the continuing turmoil in the U.K.'s financial markets.''

    The Bank of England announces its next interest-rate decision on Dec. 6. Policy makers may need to lower the benchmark rate from the current 5.75 percent at least once next year, the bank said earlier this month in its quarterly forecasts.