Nationwide Say UK House Prices Drop Most In 17 Years

According to Nationwide Building Society the UK house prices have declined by the most in at least 17 years in October, due to the prospect of Britain going into recession and the banks tightening their hold on credit.

The cost of an average UK home according to Nationwide data saw the largest decline since 1991 when records began, falling 14.6 percent to £158,872. Prices slumped 1.4 percent from September.

Bank of England forecasts show that one in ten mortgage holders will probably owe more on their homes than they are actually worth. With banks cutting back lending, bills stretching homeowners to their limits and the economy shrinking for the first time since the start of the 1990’s, economists believe that we will still see house prices declining further.

The Bank of England estimates that house prices dropped to 15 percent this would send around 10 percent of homeowners into negative equity. As the economy weakens more there is more chance of a decline as sellers lower their prices to the sale. It is likely that the Bank of England will reduce the base interest rate by half a percent.

Source: Bloomberg