Halifax predicts 'sharp' slowdown in housing market

House prices rose by just 0.4% in April, down from 1.1% in March and 1.8% in February, said the UK's biggest mortgage lender the Halifax today.

The bank added that it expects to see a "sharp" slowdown in the property market before the end of the year.

According to the Halifax's figures, annual house price inflation slowed to 23.6% last month from almost 25% in January, a trend which, if it continues, forecasts a fall in house price inflation to 9% by the end of 2003.

The April figures show the slowest rate of growth since August last year, when prices moved upwards by just 0.2%. The Halifax data follows that issued by Nationwide earlier in the week which showed that house price growth ground to a halt in April.

Nationwide said that, with prices standing still last month, the annual rate of growth slowed to 22.2% from 26.2% bringing the average price of a UK property to ?122,748. The Halifax puts the figure slightly higher at ?127,557.

Both the Halifax and Nationwide attribute the slowdown in part to the drop in first-time buyers entering the market. Halifax said that the percentage of its mortgages lent to first-time buyers had fallen by 7% to 31% since the final quarter of 2002.

"This decline reflects the much sharper rise in house prices compared to average earnings in the recent past, with many borrowers now unable to borrow enough to buy their first home," said Martin Ellis, chief economist at the Halifax.

Despite this, mortgage payments account for a lower proportion of a new borrower's income - currently around 15% - than at any other time in the last 19 years, said the bank.

It added that the number of new properties coming on to the market had increased this year by 15% compared with the same period last year, and that this had helped to reduce some of the upward pressure on prices.