House Prices Down Again

The Halifax has reported a fall in house price for the third month in a row, the first time this has happened since early 1995. The 1.1% drop in November was the biggest monthly fall since last December, and if current trends carry on, the next year will see a plunge in house prices of over 12%.

Economist at Halifax Martin Ellis still feels that the British economy is in good shape, but did say: “The increase in interest rates between July 2006 and July 2007 has taken effect. Higher mortgage repayments and falling real earnings have put pressure on households’ income, resulting in a slowdown in both house price growth and activity.”

The Bank of England is coming under increasing pressure to reduce the base rate from its current level on 5.75%, with the Monetary Policy Committee meeting this week to decide the level for December. Most experts have suggested that the Bank will leave rates unchanged for now, and will probably not reduce them until February next year.

Consumers look as though they are in the mood for some better news as a survey by Nationwide revealed consumer confidence falling at its fastest rate for over three years.

At the same time Clive Briault of Financial Services Authority has told the Council of Mortgage Lenders’ conference that the situation in mortgage markets is likely to get even worse in 2008, with 1.4m people coming of cheap fixed rates and unable to replace them with similar deals – if at all.

It is the fear of rising inflation that will probably mean the MPC will keep the base rate at 5.75%. Oil and food prices have continued to riser and the 2.1% October inflation figure is likely to be higher for November.

High street retailers are fearing a bleak Christmas in the shops as consumers tighten their belts, with mortgage fears and the rising cost of loans and credit.

So far, no one is forecasting a recession, but the possibility of the first one for 15 years is definitely increasing