Biggest monthly fall since 1992
Retailers will view with gloom the announcement by the Halifax, Britain’s largest mortgage lender, that the March fall of 2.5 percent in house prices greatly exceeded predictions, in the biggest monthly decline since September 1992.
The Halifax also reported that house prices fell by 1.1% to a UK-wide average of £191,556 in the first three months of the year. They are now only 1.1 percent higher than they were a year ago, the slowest annual growth rate for 12 years.
The figures increase pressure on the Bank of England to cut interest rates to 5 percent on Thursday. But some financial analysts warn that a rate cut may not be passed on to consumers because reduced liquidity in money markets makes it more expensive for banks to borrow.
Whistling?
Halifax chief economist Martin Ellis said that house prices were still underpinned by what Prime Minister Gordon Brown insists are ‘sound economic fundamentals’ – but then we would, wouldn’t he?
Despite a strong labour market and an acute shortage of new houses, the house price bubble was already deflating because wages have not kept pace. Tighter lending conditions simply underlined the affordability issue, even before recent credit tightening.
Many years ago another Labour prime minister entered history’s hall of shame by announcing that the devaluation of sterling did not affect ‘the pound in your pocket.’ Today’s version might be ‘the house on your grossly over-priced plot of land is still affordable.’
Official press release: Halifax House Price Index
