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May 29 (Bloomberg) -- U.K. house prices fell in May by the most in at least 17 years as the shortage of credit starved the property market of buyers, Nationwide Building Society said.
The price of an average home dropped 2.5 percent from April to 173,583 pounds ($344,000), Britain's fourth-biggest mortgage lender said today in a statement. That's the biggest drop since the index started in January 1991. From a year earlier, prices fell 4.4 percent.
Bank of England Governor Mervyn King predicted this month that property values are ``likely to fall further'' and said there is a risk that the U.K. economy may contract. Mortgage approvals fell in April by 39 percent from a year earlier, the British Bankers' Association said this week.
``Tighter credit conditions in the market at present are making it more difficult for borrowers to obtain loans,'' said Nationwide Chief Economist Fionnuala Earley in a statement. ``More weak economic news added to the gathering momentum of negative sentiment about the housing market.''
Property values have now declined for seven months, the longest streak of drops since 1992, Nationwide said today. Hometrack Ltd. and HBOS Plc, Britain's biggest mortgage lender, also reported price drops this month.
Homebuyers are paying more for mortgages after the global credit squeeze prompted lenders to curb lending. U.K. banks increased the cost of home loans with a 5 percent down payment to the highest in more than eight years in April, failing to pass on the Bank of England's three interest-rate cuts since December.
Inflation Risk
The central bank kept the main rate at 5 percent on May 8 as record oil prices pushed the inflation rate up by the most since 2002 in April. Policy makers, who will take their next decision in a week, signaled they have little scope to lower rates further as inflation is set to accelerate, minutes of the meeting showed.
David Blanchflower, the only one of nine interest-rate setters to favor a reduction, said that the slowing economy will tame inflation in two years. The bank predicts that growth will slow to about a 1 percent annual pace by the first quarter, the least since 1992.
``Stronger than expected inflation data appears to have shattered hopes of an early cut in the bank rate in June,'' Earley said in the statement today. ``But more downbeat housing market data could lead more members to join David Blanchflower in voting for pre-emptive cuts.''
To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Jennifer Ryan in London at jryan13@bloomberg.net.
Last Updated: May 29, 2008 02:00 EDT
http://www.bloomberg.com/apps/news?pid=20601087&sid=aP1i9MjbM0jo&refer=home
May 29 (Bloomberg) -- U.K. house prices fell in May by the most in at least 17 years as the shortage of credit starved the property market of buyers, Nationwide Building Society said.
The price of an average home dropped 2.5 percent from April to 173,583 pounds ($344,000), Britain's fourth-biggest mortgage lender said today in a statement. That's the biggest drop since the index started in January 1991. From a year earlier, prices fell 4.4 percent.
Bank of England Governor Mervyn King predicted this month that property values are ``likely to fall further'' and said there is a risk that the U.K. economy may contract. Mortgage approvals fell in April by 39 percent from a year earlier, the British Bankers' Association said this week.
``Tighter credit conditions in the market at present are making it more difficult for borrowers to obtain loans,'' said Nationwide Chief Economist Fionnuala Earley in a statement. ``More weak economic news added to the gathering momentum of negative sentiment about the housing market.''
Property values have now declined for seven months, the longest streak of drops since 1992, Nationwide said today. Hometrack Ltd. and HBOS Plc, Britain's biggest mortgage lender, also reported price drops this month.
Homebuyers are paying more for mortgages after the global credit squeeze prompted lenders to curb lending. U.K. banks increased the cost of home loans with a 5 percent down payment to the highest in more than eight years in April, failing to pass on the Bank of England's three interest-rate cuts since December.
Inflation Risk
The central bank kept the main rate at 5 percent on May 8 as record oil prices pushed the inflation rate up by the most since 2002 in April. Policy makers, who will take their next decision in a week, signaled they have little scope to lower rates further as inflation is set to accelerate, minutes of the meeting showed.
David Blanchflower, the only one of nine interest-rate setters to favor a reduction, said that the slowing economy will tame inflation in two years. The bank predicts that growth will slow to about a 1 percent annual pace by the first quarter, the least since 1992.
``Stronger than expected inflation data appears to have shattered hopes of an early cut in the bank rate in June,'' Earley said in the statement today. ``But more downbeat housing market data could lead more members to join David Blanchflower in voting for pre-emptive cuts.''
To contact the reporters on this story: Brian Swint in London at bswint@bloomberg.net; Jennifer Ryan in London at jryan13@bloomberg.net.
Last Updated: May 29, 2008 02:00 EDT
