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House prices in the UK plunged 15% in the year to October, Halifax said yesterday, as tighter lending continued to deter first-time buyers. Britain's biggest lender said prices fell 2.2% last month and warned conditions "remain challenging".
Would-be buyers welcomed yesterday's decision by the Bank of England to cut its base rate from 4.5% to 3%. However, analysts believe this will not help first-time buyers, which means prices are likely to fall much further.
Seema Shah, property economist at Capital Economics, said: "Lender criteria are not loosening at all. Lenders are not passing on rate cuts to new buyers." Lending had become much riskier as Britain's economic outlook continued to deteriorate. Capital predicted house prices will have fallen 35% by the end of next year.
Many economists believe it will take at least a decade for prices to regain record 2007 levels with Andrew Clare, professor of asset management at Cass business school, saying it would take until 2023.
The average price of a property in Britain is now £168,176, a fall of almost £4,000 since September and about £30,000 less than in October last year. The annual drop is the sharpest since the index began in 1983 and means that, in the past year, prices have fallen faster than at any point during the crash of the early 1990s.
Banks have continued to increase the cost of tracker mortgages over the past year and many have pulled loans for borrowers with a deposit of less than 25%.
Liberal Democrat Treasury spokesman Vince Cable said: "The next priority is to ensure that this cut is passed on to borrowers. It is very clear that the conditions attached to the government's recapitalisation of the banks were far too lax. The government-appointed directors of these semi-nationalised banks will now have to ensure they continue to supply credit and pass on rate cuts. Philip Hammond, shadow chief secretary to the Treasury, said: "The accelerating decline in house prices will come as a blow to families who stretched themselves to the limit to buy their homes and will inevitably lead to more negative equity and repossession misery as people find they cannot renew their mortgages on affordable terms.
"We hope today's interest rate cut will be passed on to bring some relief to families who are struggling."
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