U.K. house prices have dropped by the most in 25 years as the global financial crisis discouraged buyers and prompted banks to stop lending, HBOS PLC said Thursday.
The average cost of a home dropped 13.3%, to $296,000, in September from the same month a year earlier, the most since the United Kingdom's largest lender began tracking the market in 1983. Prices were down 1.3% from August.
With mortgage lending at a record low and the economy headed for a recession, the U.K. government Wednesday announced an $86 billion rescue package aimed at helping banks unblock credit markets.
The Bank of England cut the benchmark interest rate by the most since 2001 as part of a globally coordinated action to stem the biggest financial crisis since the Great Depression.
"We're not expecting a quick turnaround," Martin Ellis, the chief economist at HBOS, said in an interview Wednesday. "We hope that yesterday's announcements will help to unfreeze mortgage financing, but we expect conditions to remain challenging this year and next."
The average house price in the three months through September was 12.4% lower than a year earlier, the biggest decline since 1983. House prices are expected to fall about 20% during 2008 and 2009, Mr. Ellis said.