1:00PM New York, 6:00 PM London-U.K. house prices slumps 2.5% in March.

London stock averages fell after a report by mortgage lender HBOS said house prices fell 2.5% in March from the previous month. However, gains by commodity stocks helped trim losses.

In London trading FTSE 100 fell 0.41% or 24.6 to 5,990.20.

Of the 102 FTSE 100 index stocks 29 gained, 71 declined and 2 were unchanged. BHP Billiton led advancers in the FTSE 100 index shares with a rise of 4.57% after a fire at a key European refinery pushed prices higher.

Other commodity stocks rose as well. Rio Tinto jumped 1.04%.

U.K. house price drop 2.5% in March

HBOS Plc reported today in the Halifax Price Index that UK home prices declined 2.5% in March from February, while prices in the first quarter dropped 1% lower than in the fourth quarter 2007. Home prices fell 1.1% in the last four quarters.

Greater London, East Anglia and East Midlands recorded the biggest price rises of 1.6%, 1.4% and 2.2% respectively, but prices fell 5% in West Midlands and 4.7% in Wales.

HBOS expects a modest decline in U.K. house prices this year.

Statistics from the mortgage lender reveal that U.K. house prices have risen by £120,860 during the past decade from £70,696 to £191,556.

During the same period prices advanced 146% in Scotland, 271% in Northern Ireland, 191% in Greater London, 188% in Wales and 150% in West Midlands.

Economists believe that the strong labor market with employment at 29.5 million and unemployment below 800,000 will provide support to the housing market.

Chief economist Martin Ellis said, “Sound economic fundamentals are supporting house prices. A strong labour market, low interest rates and a shortage of new houses underpin housing valuations. Our research shows that the labour market is the key driver of the housing market. Employment is at a record high and unemployment continues to fall.""

Subprime Losses

The International Monetary Fund said on Tuesday that banks and governments should be prepared for rising losses related to credit markets and estimated that total losses can reach to $1 trillion.


The report noted, “The United States remains the epicenter, as the U.S. subprime market was the origin of weakened credit standards and was the first to experience the complications arising from the associated structured credit products.

But financial institutions in other countries have also been affected, reflecting the same overly benign global financial conditions and —to varying degrees —weaknesses in risk management systems and prudential supervision.

Industrialized countries with inflated house price levels relative to fundamentals or stretched corporate or household balance sheets are also at risk.”

The report also projected that losses on mortgages and mortgage-related securities could lead to aggregate losses of about $565 billion and if other potential losses are added, including loans and securities related to commercial real estate, consumer credit and corporations, the aggregate loss estimate rises to $945 billion.