Halifax Report Falling Home Prices

The UK’s biggest mortgage lender Halifax has reported a significant slowdown in UK house prices in figures released today, reflecting what market analysts have described as the fallout from market turmoil and rising interest rates.

In its monthly price guide survey, September house prices have fallen by 0.6% to bring the UK average rate of house price inflation down to 10.7% for the year on the same month. The news may be indicative of the extent of impact on the markets made by the sub-prime crisis and the following credit crunch.

Risky sub-prime mortgages were seen as a prime investment opportunity by banks across the US and further abroad, as was the practice of buying bad debts from within this sector. As more and more money became available to the market, so banks became more heavily integrated within that particular lending environment.

Risky by its nature, the market collapsed off the back of Federal Reserve interest rate rises, leaving many lenders in the US and across the world struggling for liquidity and charging through the roof for loans to one another.

Widespread investment from central banking authorities and drastic rates cuts were too little too late to save the banking industry, which was strongly hit by the fallout from the market.

Many analysts at Halifax have also said the news fails to surprise after the Bank of England raised interest rates on five successive occasions since the middle of 2006 to calm inflation and dampen the free-credit environment in the UK.

Whilst this is no doubt a fall on the figures, the report also reflects that on the whole the third quarter has still see a rise of around 1% in the average price of a home, which Halifax now class at just under £200,000 at £198,500 (around $400,000).

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