House price falls accelerate

As if home owners needed any more bad news! British home asking prices posted their biggest annual decline in almost 6 years as the credit markets continued to remain tight and lenders ratchet up the pain on home owners while still not passing on the recent rate reductions to borrowers. The volume of new mortgage approvals was less than half of last year’s number. The British economy is now not merely staring into the abyss, it’s leaning over the edge….holding onto a shoelace for support.

Another guide, the Halifax’s, said that house prices are falling at their fastest rate in over 50 years in the growing economic tsunami. The Halifax survey put the decline in prices in the last 12 months at 13.4% and said more steep drops were likely to be felt as the crisis worked itself out. 

Asking prices fell in Septembers right move survey at an annualised rate of 4.9%, up from 3.3% according.

The bad news is that the fall out is now spreading firmly from the construction and financial sectors to other sectors of the real economy. With this, the rate of arrears and repossessions is likely to rise as unemployment is thought likely to reach 5% in 2010. When this is coupled with a deluge of people moving off cheap 2 and 3 year fixed rate deals, the spike in repossessions is likely to put further strong downward pressure on house prices in many areas.

GDP was also predicted by the ITEM club to fall to -1% in 2009 before recovering slightly to 1% in 2010. It looks like it’s time to baton down the hatches.

Will the last person to leave please turn off the lights!

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Tags: British Economy, Credit Markets, House Prices, ITEM Club