The fall in house prices was greater than expected House prices fell by 2.5% in March, the biggest monthly decline since September 1992, much more than many analysts had forecast, the Halifax has said. House prices are now 1.1% higher than they were a year ago, the slowest annual growth rate for 12 years. Prime Minister Gordon Brown said that the UK was feeling the impact of problems from the global credit crunch. But despite the drop in prices, he said the UK was well placed to deal with the economic woes. The prime minister said the Halifax's figures should be seen in the context of 10 years of big increases and low interest rates. Speaking to the BBC, Mr Brown said the number of UK homes being repossessed was a "fraction of what happened in the early '90s".

Extra help for first-time buyers The government was not a "spectator" and was "always vigilant" on global economic difficulties, he added. Mr Brown said the government would monitor the situation and was planning to meet the Council of Mortgage Lenders (CML) and other industry representatives next week to discuss if any action was needed to help borrowers. Adjustment time? The Halifax, along with all other market commentators, is now convinced a big slowdown is under way. "We are definitely seeing an adjustment in the housing market," said Martin Ellis, chief economist at the Halifax. "I am surprised that we have seen a fall of quite this extent, but of course we have been seeing some falls in previous months, so it's not surprising that there's actually been a decline during the month." For the first three months of the year, the Halifax said prices fell by 1.1% to a UK-wide average of £191,556, according to its data. Using this figure, the average house price fell by £4,912 in March. However Mr Ellis said that the housing market was underpinned by a healthy employment environment and a steady economy. Shrinking mortgages Separate figures from the CML on Tuesday highlighted the rapid contraction of the mortgage market under the impact of the global credit crunch. Since last autumn, this has restricted the ability of banks and building societies to lend money to customers. The Halifax's announcement that house prices suffered their biggest fall since the housing crash of the early 1990s will force many people to stop, pause and gulp

Nick Robinson

BBC political editor

Read Nick's blog Brown "vigilant" over economy This has led to lenders shrinking the range of mortgages on offer, demanding much higher deposits from borrowers, and raising their interest rates on certain deals. The CML figures indicated that in the three months to February, lending to first-time buyers was at its lowest level since early 1975. The number of mortgages granted in February to all groups of home buyers was running at its lowest level since 1992. Falling prices The Halifax has also revised its predictions for 2008 and now expects prices to fall over the course of this year. Rival lender Nationwide took a similar stance earlier this month after reporting that prices had fallen for five months in a row. Analysts said that the weaker-than-expected data from the Halifax would raise expectations that the Bank of England would cut interest rates by at least 25 basis points to 5% on Thursday. AVERAGE UK HOUSE PRICES October 2007: £197,000 November 2007: £194,500 December 2007: £197,163 January 2008: £197,243 February 2008: £196,465 March 2008: £191,556 Source: Halifax

(seasonally adjusted figures) However, because the lack of liquidity in money markets is making it more expensive for banks to borrow, a rate cut would not necessarily be passed on to mortgage holders, observers say. "The sharp fall in the Halifax house price index in March highlights the growing pressure on the residential market as lenders continue to scale back their activity in the market," said Simon Rubinsohn, chief economist of the Royal Institution of Chartered Surveyors (Rics). "Loan-to-value ratios are being lowered at the same point as borrowing rates are being raised, putting increasing pressure on first-time buyers who are having to find ever larger deposits," he added.



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