BRITAIN's biggest mortgage lender yesterday spread more gloom as it warned house prices could fall 9 per cent this year.
Halifax Bank of Scotland sparked share losses across the banking sector, itself down 6 per cent while fellow lending giant Alliance & Leicester dropped 6 per cent, followed by Barclays and Lloyds TSB, both shedding more than 2 per cent.
HBOS said
its revised prediction reflected the UK's slowing economy, a rise in unemployment and limited scope for interest-rate cuts amid soaring inflation. House sales are also set to plummet by 45 per cent this year, cautioned the group.
It said arrears levels were increasing as expected, but admitted bad debt charges would rise as the property slump worsens.
Specialist mortgages, such as buy-to-let and self-certification loans, where borrowers self-declare their earnings, saw arrears levels increase from 2.59 per cent to 3.09 per cent in the past five months, said HBOS.
Meanwhile, mortgage lending resumed its downward trend last month as house-price falls continued to impact.
A total of £25.5 billion was advanced during May, 2 per cent less than in April and 19 per cent less than in May last year, according to the Council of Mortgage Lenders, with borrowing by people buying a home expected to remain "very weak".
The CML said lending activity was likely to be strongly focused on the remortgage market, with an estimated 1.4 million people coming to the end of short-term fixed-rate deals this year.
Howard Archer, chief UK and European economist at Global Insight, said: "The bad news on the housing market is pretty relentless at the moment, with the low level of mortgage activity for house purchases being a consequence of a damaging mix of stretched buyer affordability and very tight lending conditions.
The full article contains 310 words and appears in The Scotsman newspaper.
