UK in the midst of the biggest-ever housing slump, HBOS study reveals

Britain's biggest mortgage lender Halifax Bank of Scotland (HBOS) on Thursday heightened growing recession fears when it revealed that the yearlong credit crunch had wiped £20,000 ($40,000) off the cost of a home in the biggest annual fall in property prices on record.

On the day that rising inflation forced the Bank of England to leave interest rates unchanged at 5 per cent, the Halifax said house prices last month were almost 11 per cent down on a year earlier - the first double-digit decline since its monthly health check of the market was first published 25 years ago.

Prices fell by 1.7 per cent on the month, the sixth straight fall in a row, according to the lender's Halifax house price index. That took them nearly 10.9 per cent lower on the year, a sharper decline than at any time in the last housing crash in the early 1990s. Official figures released Thursday showed orders for house building 33 per cent down on a year ago and orders for commercial property down 38 per cent.

''Pressure on householders' income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers' ability to enter the market,'' Suren Thiru, an economist at HBOS, said in a statement. ''This is resulting in both lower prices and activity levels.''

Prices in the past six months have been falling at an annual rate of 20 per cent, but the British Treasury sought Thursday night to downplay the prospect of a stamp duty holiday for first-time buyers, saying it was only one of a number of options being considered for an autumn economic package.

Although falling house prices will eventually make property more affordable for first-time buyers, analysts believe the decline is part of a wider malaise caused by weaker demand at home and abroad, and the difficulty in securing credit.

The worst housing-market slump in more than two decades is deepening as rising fuel, food and credit costs erode living standards, raising the prospect of the first UK recession since 1991. The International Monetary Fund, in its recent report, had also painted a grim picture of the British economy in the near future. (See: IMF downgrades UK's growth rate, says inflation pressures to continue)

HBOS is a banking and insurance group in the United Kingdom, the holding company for Bank of Scotland plc, which operates the Bank of Scotland and Halifax brands; HBOS Australia, owner of BankWest; and HBOS Insurance & Investment Group Limited, the group's insurance division. It is one of the top five banking groups in the country by market capitalization and posted revenues of £21.29 billion last year.