U.K. house prices will only drop in 2009

During these troubled times for the property market, the Nationwide Building Society have risen to become the largest U.K. customer-owned lender, and when they talk, people are inclined to listen. Even though the news might be difficult to bear.

In a series of statements issued by the Swindon-based company yesterday, they announced that British economy will remain in recession for the remainder of 2009 and the recovery anticipated to begin next year will at best be “sluggish,” due to unemployment continuing to rise next year. The apparent recovery witnessed on the FTSE and in the financial markets will take a lot longer to filter through to the labour market, according to Nationwide.

In the property sector, building societies, currently account for around twenty percent of the U.K. mortgage market continues to have to cope with defaulting clients. Evidence of the continuing problems this is causing in the industry is the fact that Moody’s Investors Service have recently reduced their ratings on eight customer owned lenders, among them Nationwide.

A spokesman for Nationwide went on to announce that all of these factors are liable to combine to force house prices in the UK down by as much as 14 percent in 2009. This forecast comes despite the fact that price declines have slowed in recent months and U.K. banks granted more mortgages in April than the previous month.

The overall picture is the one that is less encouraging with Nationwide’s net income falling to 162 million pounds in the financial year 2008/2009 from 495 million pounds the previous year. The company’s net lending fell by three hundred percent to 2.1 billion pounds, from 8.9 billion pounds in 2007/2008.

Forecasts are that Nationwide’s mortgage turnover will continue to shrink again this year, despite their acquisition of the Cheshire Building Society and Derbyshire Building Society last year and agreement to take over the deposits and branch management of the Dunfermline Building Society in March 2009.

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Tags: Economy, Financial News, Mortgage, Mortgages, Nationwide, Nationwide Building Society, UK Banks