HALP Halifax 9.375bd

RNS Number:0915F
HBOS PLC
04 October 2007



                          Halifax House Price Index

          National Index                                September 2006



                   All Houses, All Buyers Index (1983=100)
 Index (seasonally adjusted) 642.4    Monthly Change -0.6%   Annual Change 10.7%
        Standardised Average Price (seasonally adjusted)  #198,500

Key Points
          
*    House prices fell by 0.6% in September. Overall, house prices increased by 
     0.9% in 2007 Quarter 3.  This compares with increases of 2.3% in 2007 
     Quarter 2 and 3.0% in 2007 Quarter 1, marking a continuing steady downward 
     trend in the rate of house price growth since the end of 2006.

*    A mixed pattern of monthly price rises and falls is a typical feature of a 
     more subdued housing market.  For example, there were three monthly falls 
     and three monthly increases during the first half of 2005 when the market 
     slowed following the rapid rises in the preceding few years.

*    The annual rate fell to 10.7% in September from 11.4% in August.  The 
     annual rate should decline further over the next few months as the strong 
     monthly house price gains during the autumn of 2006 drop out of the 
     year-on-year comparisons.

*    House prices increased in most regions - especially in the south of England 
     - during the third quarter. The biggest price rises were in Greater London 
     (2.3%) and the South East (1.8%).  Nonetheless, the gains in Greater London
     and South East were lower than in the previous few quarters, suggesting 
     that the market is slowing in these parts of the country.

*    The UK economy is in a strong position. Sound market fundamentals, 
     including high levels of employment and a shortage in the number of 
     properties available for sale will continue to support house prices. Gross 
     domestic product (GDP) increased at an annual rate of 3.1% in 2007 Q2, 
     comfortably above the long-term average rate of 2.5%.  The number of people 
     in employment has risen by 132,000 over the past year and is at an historic 
     high.

Commenting, Martin Ellis, Chief Economist, said:

"House prices fell by 0.6 per cent in September.  Overall, prices in Quarter 3
were 0.9% higher than in the previous quarter.  This compares with increases of
2.3% in 2007 Quarter 2 and 3.0% in 2007 Quarter 1, marking a continuing steady
downward trend in the rate of house price growth since the end of 2006.

September's price fall is consistent with the normal behaviour of the market
during a slowdown.  A mixed pattern of monthly price rises and falls is a
typical feature of a more subdued housing market.

The UK economy is in a strong position. Sound market fundamentals, including
high levels of employment and a shortage in the number of properties available
for sale will continue to support house prices."

House price growth slows again in Quarter 3.....

Overall, house prices increased by 0.9% in 2007 Quarter 3.  This compares with
increases of 2.3% in 2007 Quarter 2 and 3.0% in 2007 Quarter 1, marking a
continuing steady downward trend in the rate of house price growth since the end
of 2006.

.....and market activity also eases

Mortgage approvals to fund house purchase fell by 5% in August to 109,000
(seasonally adjusted).  Approvals were 9% lower than in August 2006. (Source:
Bank of England)

The level of new buyer interest in purchasing a house fell for the ninth
successive month in August, highlighting that potential buyers have become more
cautious.  (Source: RICS)

Sound fundamentals support the housing market

A strong economy and healthy labour market will provide a sound underpinning for
the housing market over the coming months.  Gross domestic product (GDP)
increased at an annual rate of 3.1% in 2007 Q2, comfortably above the long-term
average rate of 2.5%.  (Source: ONS)

The number of people in employment has risen by 132,000 over the past year to a
record total of 29.07 million.  There was an 84,000 increase in employment
during the three months to July compared with the preceding three months.
(Source: ONS)

Continuing supply shortages of both new housebuilding and secondhand properties
for sale will also support house prices.

Interest rate effect is increasing as borrowers come off very low fixed rates
......

The CML estimates that around 1.3 million borrowers took out fixed-rate
mortgages in 2005, and a further 1.5 million in 2006.  The majority of these
mortgages would have been fixed for two years. A borrower with a #114,000
mortgage - the average in 2005 - taken out at the average two year fixed rate in
2005 of 5.08%, would be making monthly repayments of #669.02.   When the deal
expires this year, the new monthly repayments would be #771.35 - an increase of
16% or #102 - assuming that the borrower moves onto the current average two year
fixed rate of 6.58%.

The overwhelming majority of borrowers coming off fixed rate deals are expected
to be able to absorb the increase in payments.  Most people's earnings will have
risen since they took out their mortgage - average earnings have risen by 8%
over the past two years - providing more income to finance the higher interest
payments.   House prices have also risen strongly in the past two years
providing an equity cushion for new borrowers.

The Bank of England recently estimated that the resulting 'payment shock' will
reduce the annual post-tax income growth of the household sector by only 0.1
percentage points.*

Static 'real' income growth in the first half of 2007 is also constraining
housing demand

Household disposable income in 2007 Q2 was unchanged from the level in 2006 Q4
once the effects of inflation are removed.  (Source: ONS)

South sees highest price rises in Q3 but signs of slowing in London and the
South East ......

House prices increased in most regions during 2007 Q3. The biggest price rises
were in Greater London (2.3%) and the South East (1.8%).  Despite recording the
biggest price rises in the UK in Quarter 3, the gains in Greater London and
South East were lower than in the previous few quarters, suggesting that the
market is slowing in this part of the country.

Fall in Northern Ireland but this follows phenomenal growth in recent years ...
...

There were house price falls in Northern Ireland (-3.2%) and the North (-2.1%).
The fall in Northern Ireland simply partly offset some of the 8.2% increase in
the previous quarter and must be set against the background of a spectacular 47%
rise in house prices in the year to 2007 Quarter 2. The modest decline in the
North should be seen in the context of the substantial price rise (122%)
recorded over the past five years.

Slowest house price growth in the past year in northern England and midlands

All 12 regions of the UK have recorded a rise in house prices over the past
year.  Five regions have seen double digit growth: Northern Ireland (29.1%),
Greater London (18.6%), Scotland (14.2%), the South East (13.7%) and East Anglia
(11.1%).   The remainder of the country has experienced single digit growth with
the smallest increases in the West Midlands (4.7%) and the North West (5.2%).
More generally, northern England and the midlands have seen the lowest house
price growth in the past year.

* Inflation Report, August 2006


NOTE: The 10.7% number is the quarterly year-on-year figure.  This figure
provides a much better picture of underlying trends compared to a monthly
year-on-year number as it smoothes out any short-term fluctuations.

The Halifax House Price Index is prepared from information that we believe is
collated with care, but we do not make any statement as to its accuracy or
completeness.  We reserve the right to vary our methodology and to edit or
discontinue/withdraw this, or any other report.  Any use of this report for an
individual's own or third party commercial purposes is done entirely at the risk
of the person making such use and solely the responsibility of the person or
persons making such reliance.  (c) Bank of Scotland plc all rights reserved
2007".

                      This information is provided by RNS
            The company news service from the London Stock Exchange
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