Housing market recovery 18 months away

The chief executive of HBOS, which owns Halifax, the UK’s largest mortgage lender, has warned that house prices are unlikely to begin a recovery before 2010.

According to Andy Hornby, confidence in Britain’s housing market will not return until banks can raise significant sums on the wholesale financial markets.

In addition, house price deflation could be stronger than that seen in the early 1990s, as UK lenders will have difficulty in accessing funding until US house prices begin to recover.

While Mr Hornby expects the UK economy to continue its slowdown he believes unemployment statistics will stay below levels seen in the early 1990s and that relatively high employment will continue to underpin the UK housing market.

Speaking about the process of recovery, the chief executive put forward the view that the credit crisis has altered banks’ lending models for the long term and that in future lenders will rely more on customer deposits and less on the money markets.

For this reason, he does not anticipate a return to the strong growth in credit seen prior to the crunch.

HBOS currently has around a 20% share of the UK’s mortgage market.

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