Nationwide announce largest UK house price drop since 1990 on 100 Mortgages

A report out by Nationwide Building Society showed that U.K. house prices fell at the fastest annual pace in almost two decades in August. This comes as the threat of a recession and tighter mortgage lending discouraged homebuyers.

In the report it showed the average value of a home in the U.K. fell a staggering 10.5 percent leaving the average home valued at £164,654 this is the biggest downslide since the final quarter of 1990.

From July the house prices have dropped a further 1.9 percent this is the 10th monthly decline.

With inflation rising the fastest in more than a decade, and the stagnant mortgage lending it is gearing us towards the worse property slump since the last recession in the early 1990s. This could now step up the need for another interest cut this year.

Chief economist at Nationwide, Fionnuala Earley said in a television interview “Confidence in the housing market has been evaporating,” and she added “you would expect that given the amount of economic gloom we’re seeing.”

U.K. government bonds rose. The yield on the two-year gilt, which is more sensitive to rate expectations, dropped 4 basis points to 4.46 percent at 10:31 a.m. in London.

It’s also been said that we could be heading for a 15 percent house price fall in the year end if they continue to fall in the pace they have been. This meaning that in 2008 residential real estate will have lost around a fifth of its value in real terms.

Added to this, the pound has dropped a further 7 percent this month against the dollar.

Source: Bloomberg

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