House prices could drop a quarter

House prices could drop as far as 25 per cent before the housing market starts to pick up again, it has been warned. Nationwide building society's chief executive, Graham Beale, said that the recovery is unlikely to start before 2010, indicating that the Government's announcement on stamp duty last week would do little to reverse the current downturn. He said: "I think next year we're going to see a similar pattern to what's happened this year. "I think it will be stable but we're going to see further falls in house prices and I think we're going to be into 2010 before we get to the new world, whatever that is." But the impact of US credit conditions on the UK mortgage market was not felt in all quarters, he argued, as lack of liquidity was not the problem. He said: "If you're a borrower and you've got a good credit record and you've got a deposit there's massive choice of product. Liquidity is not an issue." The reason why others were struggling was "nothing to do with liquidity" but to do with a change in lenders' attitude to risk, he contended. Mr Beale said: "A lot of lenders that were more aggressive in their lending activity have closed the business in terms of new lending so that's where the void is in the marketplace." Borrowers with impaired credit histories were among those who suffered as a result, he said. Building societies were doing well out of the credit crunch, he added, receiving record inflows over the past 15 or 16 months as people saw them as "safe and comfortable". Nationwide took £1 in every £5 invested in the UK last year and 1.5 million new accounts were opened, he said. The Government announced last week it would increase the level at which stamp duty kicks in from £125,000 to £175,000 for one year.

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ITN | September 9, 2008