House prices 'face fall of 9%'

Property prices are likely to fall by 9 per cent this year, Halifax Bank of Scotland has warned.

The UK's biggest mortgage lender said in an update on trading ahead of its £4 billion cash call to investors that the forecast for the property sector will lead to higher bad debt charges, with mortgage arrears levels already rising.

It added that write-downs amid the credit crunch had risen by £58 million to £1.03 billion since the end of March.

The forecast for house prices marks a steep decline from the bank's previous estimate for "mid-single digit" declines in 2008.

HBOS said its revised prediction reflected the UK's slowing economy, a rise in unemployment and limited scope for interest rate cuts amid soaring inflation.

Arrears levels for borrowers falling behind with repayments have risen to 1.89 per cent of total mortgages from 1.67 per cent at the end of December.

HBOS said the level for specialist mortgages, such as buy-to-let and self-certification loans, where borrowers self-declare their earnings, has risen from 2.59 per cent to 3.09 per cent in the past five months although it stressed the figures were in line with its expectations.

HBOS said: "In a more difficult trading environment, HBOS expects a resilient performance in 2008, which will provide a sound platform for the future."

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