Residential landlords could see their property investments decline in value following predictions by Britain’s biggest mortgage lender that house prices are likely to fall by 9 per cent this year.
The Halifax Bank of Scotland (HBOS) has reported that sales this year are down by 45 per cent compared with last year.
The number of borrowers falling behind with repayments has risen to 1.89 per cent of total mortgages, up from 1.67 per cent at the end of 2007.
HBOS originally predicted a smaller decline in the housing market but says the UK's slowing economy, growing unemployment and soaring inflation is having a bigger affect than originally anticipated.
Figures recently released by the Nationwide building society said that house prices were down by 4.7 per cent in the first five months of the year, and by 3.2 per cent in the past three months.
The gloomy news from HBOS comes at the same time that the Governor of the Bank of England, Mervyn King, sent his first letter to Prime Minister Gordon Brown explaining why inflation had risen above the 3 per cent mark, to its highest level for more than 14 years.
The Bank of England Governor has to write an open letter to the PM whenever inflation is more than one percentage point away from its target of 2 per cent on the consumer price index (CPI).
Inflation on the CPI hit 3.1 per cent in March, the highest level since August 1992.
King said the volatility of inflation was in line with the Bank’s forecast, and he expected it to fall back within months.
Experts are predicting that the Bank’s Monetary Policy Committee will look at increasing interest rates again in an attempt to control inflation.
