HBOS reviews its house price falls predictions

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by Kay Murchie

Halifax and Bank of Scotland owner HBOS, has reviewed its house price fall predictions and said property values will fall by 9% this year. It had previously predicted that the fall would be a mid-single digit.

The UK’s largest mortgage lender said it now expects the number of houses sold across the country during 2008 to almost halve.

HBOS also expects the British economy to slow further this year with an increase in unemployment and low interest rates.

As a result, falling house prices will mean it will have to write-off more of its loan book as potential bad debts. The group added that it is experiencing a rise mortgage borrowers failing to keep up with their payments.

The bank highlighted that the profitability of its mortgage lending should improve in 2009.

Its comments came ahead of the launch of a £4 billion cash call on shareholders.

In a trading update, the bank said that write-downs linked to sub-prime related assets and loans had increased by £58 million to £1.03 billion since the end of March.

Chief executive, Andy Hornby, said trading was satisfactory and the bank should demonstrate a resilient performance in 2008.

In related news, Halifax said it has attracted far more savings this year compared with last year.