Nationwide chief predicts 25% fall in house prices

The head of Nationwide Building Society, Graham Beale, is predicting that UK house prices could fall by as much as 25% from their peak last autumn.

Speaking to BBC News, the chief executive said that signs of a recovery in the housing market may be delayed until 2010 and that prices will continue to fall throughout the remainder of 2008 and during 2009.

His assessment of the market is similar to that of Andy Hornby, chief executive of HBOS, who has forecast a similar 18 month endurance test for homeowners and the economy.

According to the BBC, the prediction could mean that 2.5 million households will enter negative equity.

Mr Beale holds out little hope that government intervention will foreshorten a period of what he sees as necessary price adjustment, but believes the US Treasury’s bail-out of US mortgage entities, Fannie Mae and Freddie Mac, will help to restore confidence in the financial markets.

This could ease the shortage of funding that has led to the UK’s mortgage famine but Mr Beale does not believe the rescue of Fannie and Freddie can immediately revitalise Britain’s housing market.

The remarks of both Mr Beale and Mr Hornby come as banks and building societies have begun petitioning the Treasury to extend the Bank of England’s Special Liquidity Scheme.

The scheme was introduced in April since when it has been providing funds for UK mortgage lenders by allowing them to swap mortgage-backed securities for tradable Treasury bills.

The market for mortgage securities has been frozen since the credit crisis took grip last summer and the scheme has been a lifeline for UK banks.

It is due to end on 20th October.

Discuss this in the Finance Markets forums

Story link: Nationwide chief predicts 25% fall in house prices