Nationwide chief forecasts 25% fall in house prices

The chief executive of Nationwide Building Society, Graham Beale, is predicting that house prices will continue to fall during 2008/09 and possibly into 2010.

Mr Beale is expecting a peak to trough decline of 25%, after which improved affordability ratios will encourage first-time buyers back into the market.

The comments came as the UK’s largest building society reported that its net new mortgage lending had fallen by over two-thirds.

In the six months to the end of September, Nationwide’s lending for new mortgages amounted to £1 billion, compared with £3.6 billion a year earlier.

The Society expects the UK mortgage market to continue to shrink during 2008, taking new lending down to around £18 billion, one-fifth of its 2007 value of £90 billion.

The lender says it has focused on high quality business and reported that only 0.4% of its residential mortgage customers are three months or more in arrears, well below the industry average of 1.33%.

However, pre-tax profit for the first half of the building society’s fiscal year fell 18%, to £322 million, and its share of UK net residential mortgage lending declined to 5.6% during the six months, from 6.2% a year earlier.

The mutual has confirmed that it is passing on the full 1.5% cut in the Bank of England’s base rate, announced last Thursday.

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