House prices 6.1% lower than a year ago

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by Kay Murchie

According to the Halifax, house prices in the UK fell by 2% last month, and prices are 6.1% lower than they were compared with this time last year.

The UK’s largest mortgage lender said the average home now costs £180,344, which is the same level as in August 2006.

House prices are on a downward spiral due to a lack of activity in the market said the lender. A decade-long housing boom and the ongoing mortgage squeeze are to blame for the latest monthly fall.

Recently, the lender predicted that UK property prices will fall by around 9% during 2008, after it revised its forecast from February when it said that the market would be flat this year.

Its rival, the Nationwide, said that house prices fell by 0.9% on average last month, with the average home costing 6.3% less than 12 months ago.

The news comes as further job losses have been announced in the housebuilding industry as Barratt’s is the latest to announce 1,200 job losses due to falling house prices and the lack of mortgages.

Yesterday, Bovis Homes and Redrow confirmed that they are shedding shed 400 and 550 jobs respectively. Earlier this week, Persimmon announced 2,000 job losses.

The Bank of England’s Monetary Policy Committee is meeting today to announce its latest interest rate decision.

Interest rates are expected to be kept on hold at 5% but Howard Archer, chief UK and European economist at Global Insight, said a weak economic outlook and the mortgage freeze could mean that the Bank of England may raise interest rates, which would be very bad news for the housing market.