HALP Halifax 9.375bd

    RNS Number : 4251F
  HBOS PLC
  09 October 2008
   


    Halifax House Price Index
 National Index  September 2008


            All Houses, All Buyers Index (1983=100)
    Monthly Change  -1.3%            Annual Change -12.4%
   Standardised Average Price (seasonally adjusted)  �172,108


    Commenting, Martin Ellis, Chief Economist, said:
    "House prices declined by 1.3% in September. The overall price decrease in the three months to September was very similar to that in the
previous quarter, indicating that the trend rate of decline may be beginning to stabilise.
      
    The ongoing pressures on householders' income, combined with the reduction in the availability of mortgage finance, however, mean that
market conditions will remain challenging."


 Key Points
 * House prices fell by 1.3% in September.  This was the smallest monthly fall
 for seven months. 


 * House prices nationally declined by 5.2% in Quarter 3.  This was almost
 identical to the 5.1% fall in Quarter 2, indicating that the trend rate of
 decline may be beginning to stabilise.


 * House prices in September were 12.4% lower on an annual basis. The UK
 average price has returned to close to the level it was at in January 2006
 (�170,866). 


 * House price to earnings ratio - a key affordability measure - is improving.
  The house price to average earnings ratio has fallen from a peak of 5.84 in
 July 2007 to 5.02 in July 2008. This is the lowest level for more than four
 and a half years (February 2004: 5.01). We expect a further improvement in
 the ratio as prices continue to soften. The long-term average is 4.0.


 * The average mortgage rate paid by all borrowers (i.e. the average rate on
 outstanding mortgage loans) has fallen slightly from 5.91% in August 2007 to
 5.83% in August 2008. Yesterd


    Negative real earnings growth, high house prices relative to incomes and reduced mortgage availability constrain housing demand
    Average earnings have increased at an insufficient pace to match the rise in retail prices over the past year, rising by 3.5% compared
with a 5.0% increase in the Retail Price Index. At the same time as this decline in real earnings, significant rises in fuel and food prices
- 25% and 13% higher respectively during the last 12 months - have reduced the amount of discretionary income available to households. 

    The resulting pinch on incomes, combined with the high level of average house prices in relation to earnings, has made it difficult for
potential house purchasers to enter the market. The decline in credit availability is a further constraint on buyers. These significant
pressures on housing demand are causing house prices and activity to fall.


    Housing market activity declines further but some signs of stabilising
    The number of mortgages approved to finance house purchase was virtually unchanged in August at a seasonally adjusted 32,000 compared to
33,000 in July. Nonetheless, approvals were 70% lower than in August 2007. (Source: Bank of England)

    Completed property sales in August 2008 were 47% lower than in August 2007. Newly agreed sales - i.e. not yet completed - continued to
fall, but the pace of decline stabilised. (Source: RICS)

    Annual house price inflation at -12.4% in September
    The annual rate of house price inflation - measured by the average price over the three latest months compared with the same period a
year earlier - was -12.4% in September.  The UK average price has returned to close to the level it was at in January 2006 (�170,866). 

    House price to earnings ratio - a key measure of housing affordability - is improving
    The house price to average earnings ratio has fallen from a peak of 5.84 in July 2007 to 5.02 in July 2008 (latest available). This is
the lowest level for more than four and a half years (February 2004: 5.01). We expect a further improvement in the ratio as prices continue
to soften.  The long-term average is 4.0.

    Mortgage rate paid by new borrowers has risen *
    The average mortgage rate paid by new borrowers has risen by 22 basis points over the past year from 5.88% in August 2007 to 6.10% in
August 2008 despite a 75 basis points cut in Bank rate over the period. This increase reflects the significant rise in lenders' funding
costs since the beginning of the financial markets crisis.  

    * but the rate paid by existing borrowers has fallen
    The average mortgage rate paid by all borrowers (i.e. the average rate on outstanding mortgage loans), however, has fallen slightly over
the same period, from 5.91% in August 2007 to 5.83% in August 2008 as those on existing tracker rates have benefited from the Bank of
England rate cuts. (Source: Bank of England)

    Interest rate cut will help many borrowers
    The recent weakening in the economy has alleviated the MPC's inflationary concerns over the coming months sufficiently to provide the
scope for yesterday's cut in Bank rate. Lower interest rates will help mortgage borrowers faced with increasing pressures on their finances
and provide a valuable support to the housing market.







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