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House prices see fastest fall in 15 years
July 10th 2008
House prices in the UK are falling at the fastest rate in 15 years, with a 6.1% decline on the cost of an average home from a year ago, according to recent figures released by Halifax, Britain?s largest mortgage lender.
This represents the biggest recorded drop since March 1993, with the average price of a property falling by 2% in June (the equivalent of ?900 a week) to stand at ?180,344, compared with ?197,243 in January, and down by almost ?20,000 on last August's peak of ?199,600.
The figures add to the ever bleaker picture of the housing market, whose woes have been worsened by tightened mortgage lending, high mortgage rates, rising inflation and a loss of consumer confidence, leading to record lows in the demand for property.
With heightened concerns about inflation, the Bank of England has decided today to keep interest rates on hold at the current 5% level. The bank reported that in June mortgage rates surged to their highest level in eight years.
The current data has led to revised forecasts of house price falls, with some analysts predicting a 15% fall this year and a 12% fall in 2009, which represents a 26% fall from the August 2007 peak by the end of next year.
The sharp downturn in the housing market of course has serious repercussions on the rest of the economy, and in the building sector alone thousands of jobs have been shed as sales of new-build homes continue to plummet and mortgage approvals continue to decline. Barratt Developments plc today announced 1,200 job cuts in response to the slump, becoming the fifth UK homebuilder to cut jobs this month.
A separate report from the Royal Institution of Chartered Surveyors (RICS) shows that affordability for some first-time buyers remains a major problem, despite the recent house price falls. Commenting on this, Lawrence Smith of Decision Homebuyers said, ?With the larger deposits demanded by lenders and the increase in other up-front buying costs, it is harder than ever for potential buyers to get a foothold on the housing ladder?.
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