House prices fell at a record pace last month to their lowest level since August 2004, with prices in the three months to February down 17.7% from a year ago, mortgage lender Halifax said on Thursday.
The data is further gloomy news for the Bank of England’s Monetary Policy Committee, which is expected to cut interest rates by half a percentage point to a record low of 0.5% later and set in motion a radical new policy of boosting the money supply to encourage lending.
Halifax’s monthly survey showed a 2.3% fall in house prices in February alone, and means prices are 19.7% lower than from their peak in August 2007, with the average home now worth 160,327 pounds.
February’s monthly decline more than offset January’s upwardly revised increase of 2.0% and was slightly worse than analysts’ forecasts for a fall of 2%, and makes for an annual decline of 17.8% -- only surpassed by December’s 18.4% annual drop.
February’s 17.7% quarterly annual decline, the annual measure favored by Halifax, is the biggest since the lender started collecting monthly data in 1983.
“House prices remain very much on a downward track,” said Howard Archer, chief UK economist at IHS Global Insight. “While latest mortgage approvals data suggest that housing market activity may have bottomed out and survey evidence indicates that buyer enquiries have picked up significantly recently ... we are skeptical that sales will pick up substantially anytime soon,” he said.
Halifax’s results closely match those published by rival lender Nationwide, which reported an annual decline of 17.6% for last month.
Halifax, now part of Lloyds Banking Group, said the ratio of house prices to earnings, a key affordability measure, was at its lowest for six years at around 4.4, down from 5.8 at the peak of the boom but still above its long-run average of 4.0.
“Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market,” said Halifax chief economist Martin Ellis. (Reuters)