LONDON - Home prices in the United Kingdom fell 2.5 per cent in March, the biggest one-month drop since 1992, a major mortgage lender said Tuesday.
Compared with a year earlier, prices for homes grew only 1.1 per cent in March, the lowest rate of annual growth in a dozen years, according to the Halifax House Price Index.
"Overall, we expect there to be a modest (low single-digit) decline in U.K. house prices this year,'' the report said.
Halifax said prices were easing back from the peak of Britain's real-estate boom: "UK prices have increased by 171 per cent over the past 10 years and by 51 per cent over the last five years.''
But economists and industry experts remain concerned about how far prices will fall.
"There is a clear risk that this housing market correction will be sharper and deeper than we currently expect,'' said Seema Shah, property economist at Capital Economics, who said the Halifax had reported a "stunningly large drop.''
British lending institutions have tightened mortgage requirements in response to havoc in global credit markets. All major U.K. lenders have cut off loans for the full purchase price for a home, and now require down payments of at least 5 per cent.
The Council of Mortgage Lenders reported Tuesday that fewer home buyers were applying for fixed-rate mortgages, apparently in the expectation that the Bank of England will continue to reduce base interest rates. Some 52 per cent of mortgage applications in February were for fixed-rate mortgages, the lowest proportion in three years, the council said.
"There has been consistent evidence of tightening in lending criteria which will lead to shrinking pipelines of new business as the recent Bank of England's credit condition survey made clear,'' said Michael Coogan, director general of the Council. "We expect this process of further tightening in lending criteria to continue in the second quarter as lenders respond to the challenging market conditions.''
Chris Wood, vice president of the National Association of Estate Agents, said sellers are now accepting about 10 per cent less than their asking prices.
"House prices are dipping but we are not seeing the market go into terminal decline,'' Wood said.
"The market is catching its breath. It has a sniffle, rather than influenza.''
