U.K. House Prices Fell in November, Nationwide Says

By Jennifer Ryan

Nov. 27 (Bloomberg) -- U.K. house prices fell for a 13th month in November as the financial crisis deterred homebuyers and banks rationed mortgages, Nationwide Building Society said.

The average cost of a home slid 0.4 percent from October, when it fell 1.3 percent, the Swindon, England-based mortgage lender said in an e-mailed statement today. Prices dropped 13.9 percent on the year to 158,442 pounds ($241,180).

Consumer spending fell the most since 1995 in the third quarter as unemployment rose and house prices dropped, government data showed yesterday. Bank of England Governor Mervyn King said Nov. 25 that getting banks to lend again ``is more important than anything else at present.''

``With the economy in recession, conditions do not appear very favorable for a swift recovery in the housing market,'' said Fionnuala Earley, chief economist at Nationwide. ``With prices falling at their current rate there is also little incentive for new borrowers to hurry into the market.''

The decline in home values in November on the month was still the smallest since prices started falling a year ago. The British pound rose against the dollar for a third day, trading at 1.5410 at 9:12 a.m. in London, from $1.5326 yesterday.

Consumer spending fell 0.2 percent and investment dropped 2.4 percent in the third quarter, the Office for National Statistics said yesterday. Gross domestic product slipped 0.5 percent, the first decline since 1992.

Tax Cuts

The government has pledged around 20 billion pounds of tax cuts and spending between now and April 2010 to counter Britain's first recession since 1991 and the end of the decade-long housing boom that saw house prices triple in a decade.

A report by former HBOS Plc Chief Executive James Crosby published this week showed new mortgage lending may fall to zero next year as financial institutions nurse credit losses and writedowns stemming from the collapse of the U.S. subprime mortgage market.

King told lawmakers this week that the credit freeze is the ``most pressing'' challenge facing the economy, and refused to rule out full nationalization of banks if that were required to get them lending again. Central Bank Deputy Governor Charles Bean said the turmoil in credit markets may warrant ``aggressive'' moves in the key interest rate.

Policy makers lowered the benchmark by 1.5 percentage points to 3 percent last month, the lowest since 1955. They will announce their next decision on rates on Dec. 4.

To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net