HBOS has almost doubled its prediction for the fall in house prices by the end of this year. Recently the bank predicted a fall of almost 5% but in its Trading Update this figure was revised to 9%. This is the highest figure since 1989 when a fall of 10% was predicted.

HBOS explained this is because the economy will continue to slow through the rest of 2008. It also predicted that there will be a modest rise in unemployment and that due to inflationary pressures the Monetary Policy Committee (MPC) is unlikely to reduce interest rates below its current level.
The Trading Update also looked at the levels of mortgage arrears on the bank’s books. HBOS, which sells around 20% of the country’s mortgages, has found that 1.43% of its total mortgages are in arrears, an increase of 0.13% from December 2007. The bank has found that there has been a more significant increase in arrears for specialist mortgages, which includes buy-to-let. Specialist mortgages have increased by 0.39% from 1.97% in December 2007 to 2.36% by the end of May. Although mortgage arrears have been increasing, HBOS said that these are in line with its predictions for the year.