Record fall in house prices

Britain's biggest building society today reported a record fall in house prices as another leading mortgage lender predicted an even bigger 20 per cent slump in values.

The bleakest news in a barrage of negative economic statistics released today came from the bank HBOS as it warned house prices would fall by a fifth by the end of next year.

The Nationwide said prices had already fallen by 8.1 per cent during the past year - the biggest annual drop in values ever recorded by the lender.

City analysts added to the woe by predicting a 30 per cent slump in house prices by 2010 as the market heads "rapidly south" and issuing a further warning of "serious downside risks" to the wider economy.

In a further sign of growing economic gloom, separate figures released today showed consumer confidence has plunged to its lowest level since records began.

The onslaught of bad news will intensify the pressure on Prime Minister Gordon Brown amid concern that the economic downturn could soon become a fullblown recession.

Today's figures will heighten those fears with Fionnuala Earley, the Nationwide's chief economist, warning that the society had now seen nine successive months of house price falls that appeared set to continue.

She said the average price of a home was £169,316 - nearly £15,000 down on a
year ago. "The latest batch of economic data has been fairly poor," she said. "The risk of an economic recession in the UK is now clearly rising."

Although, the Nationwide added, house prices remain £11,000 higher than three years ago, last month's 1.7 per cent fall in values is double the rate of decline for May and suggests the property slump is accelerating. HBOS warned of a 20 per cent fall in values through 2008 and 2009 and revealed the number of its customers in mortgage arrears has risen from 35,600 at the start of the year to 39,300.

The Bank of England said just 36,000 new home loans were arranged during June, while net mortgage lending, which strips out redemptions and repayments, fell to a near eight-year low of £3.1billion.

A report by ratings agency Standard & Poor's yesterday warned that 1.7 million homeowners could be plunged into negative equity if house prices fall by a further 17 per cent.