House Prices in U.K. stall on the Subprime mortgage fallout (Bloomberg) (05-02-2008)

Feb. 5 (Bloomberg) -- U.K. house prices stalled in January as credit costs rose and banks granted fewer mortgages, a report by HBOS Plc showed.

According to the U.K.’s biggest mortgage lender HBOS, the average cost of a home in Britain remained at £197,244 ($389,000) from December. Prices fell 1 percent in the three months through January from the previous quarter and rose 4.5 percent from a year earlier.

Fewer loans have been arranged by U.K. lenders for prospective home buyers as the losses arising from the collapse of the U.S. subprime mortgage market weigh.

The report is a further indication that the Bank of England may have to cut interest rates further as soon as this week possibly by a quarter point to 5.25 percent at the end of their two-day rate-setting meeting on Feb. 7, after December’s rate cut. A forecast by 61 economists in a Bloomberg News survey points that way.

Luxury-home prices in London rose at the fastest rate in four months in December as international buyers and a growing number of Britons paid more than 10 million pounds for properties, Knight Frank LLC said in a separate report today.

U.K. personal insolvencies fell 3.9 percent in the fourth quarter from the previous three months, a sign that consumers were still managing to cope with record 1.4 trillion pounds of debt late last year.

The central bank has forecast economic growth to slow this year to around 2 percent from more than 3 percent in 2007, the fastest in three years.

A slump in U.S. house prices forced banks worldwide to post $146 billion in asset writedowns and credit losses, making U.K. lenders more wary of extending credit to Britons.

U.K. mortgage approvals fell in December to the lowest in at least nine years while consumer credit slid to the least in 15 years, the Bank of England said Jan. 30. Banks plan to make fewer loans in the first quarter, according to a central bank survey published in January.

Other reports are showing a weaker property market. Home values fell for a third month in January, the longest stretch of declines since 2000, Nationwide Building Society, Britain's fourth-biggest mortgage lender, said Jan. 31.

Source: Bloomberg