U.K. House Prices Drop Annual 10%, Hometrack Says

By Brian Swint

March 2 (Bloomberg) -- U.K. house prices fell the most since at least 2001 last month as rising unemployment and a dearth of loans discouraged buyers, Hometrack Ltd. said.

The average cost of a home in England and Wales declined 10 percent from a year earlier to 157,000 pounds ($223,000), the London-based property market researcher said in a report today. Prices slipped 0.8 percent from a month earlier, led by Wales.

The economy contracted at the sharpest pace since 1980 in the fourth quarter and joblessness rose to a 10-year high in January, intensifying Britain’s yearlong property slump. The Bank of England will probably lower the key interest rate to a record low this week to help the country out of recession.

“2009 is a year when the housing market is at the mercy of the economy and rising unemployment,” said Richard Donnell, director of research at Hometrack. “A broad-based recovery in the housing market will require a major turnaround in consumer confidence which is still some way off yet.”

Banks and building societies granted 31,000 mortgages in January, the Bank of England said today, close to November’s decade-low of 27,000. Overall net consumer lending increased by 1.1 billion pounds, the weakest pace since 1993.

While the number of new buyers registered with real-estate companies increased 17 percent in February, prices fell across three-fifths of the country and sellers are achieving less than 90 percent of their asking price, Hometrack said. All 10 regions tracked in the survey of 5,800 real-estate agents and surveyors showed price declines.

Repossessions to Rise

Repossessions on U.K. mortgages that don’t meet standard lending criteria rose by a quarter in the last three months of 2008, while delinquencies increased by a fifth, according to Standard & Poor’s.

Foreclosures on so-called non-conforming mortgages included in 35 billion pounds of bonds rated by S&P climbed to 3.47 percent in the fourth quarter, from 2.77 percent in the previous three-month period, S&P said in a report published today. The percentage of home loans in arrears for more than 90 days climbed to 12.46 percent, from 10.3 percent, the New York-based ratings company said.

The U.K. central bank will this week bring the benchmark interest rate to 0.5 percent from 1 percent, the lowest since it was founded in 1694, according to the median of 60 economists’ forecasts.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net.