Finance news. My opinion.

House prices rose 1.3 per cent in December, defying predictions of a property price crash.

However, data from Halifax shows annual house price growth in the three months to December fell to 5.2 per cent from 6.2 per cent in November and the 11.4 per cent in August.

The prediction for 2008 is now flat house growth, with prices held up by a strong economy – with high levels of employment – and the Bank of England’s predicted interest rate cuts for 2008.

Martin Ellis, chief economist at Halifax, said: “This mixed pattern of monthly price rises and falls is a typical characteristic of a subdued market.

“Overall, the housing market continued to slow in the final quarter of 2007 with prices slightly lower than in the preceding quarter.

“Higher mortgage repayments in response to the series of five interest rate increases between August 2006 and July 2007 and falling real earnings have put pressure on households’ income, resulting in a slowdown in both house price growth and activity in recent months.”

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors (Rics), said the Halifax figures did not mark at turning point for the market.

“Our suspicion is the market environment is likely to remain challenging for at the least the first half of this year and that activity levels will remain subdued,” he said.

“However, unless inflation proves an increasing barrier to the Bank of England’s ability to lower base rates there is unlikely to be a material decline in house prices.”

Mr Rubinsohn went on to explain mortgage lenders were key to the future of the property market – along with the effects of the credit crunch, which are making securing a mortgage harder quick payday loan.

“A key issue for first-time buyers eager to take their first step onto the property market in this climate will be the willingness of lenders to provide finance on attractive terms,” he said.

“The slippage in money market rates since the start of the new year suggests that there is more chance of further interest rates cuts being passed on more fully to borrowers but just as important will be the willingness of lenders to maintain loan to value ratios.”

However, Howard Archer, chief economist at Global Insight, expects house prices to fall by three per cent over 2008.

“While the 1.3 per cent rise in house prices reported by the Halifax is undeniably a surprise, it is likely to be largely a correction after the particularly marked overall fall in prices through the previous three months,” Mr Archer said.

Despite the predicted stagnation of property values, Halifax is reminding property owners that house prices have risen 182 per cent over the last decade – making a £70,000 house in 1997 now worth £197,000.
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WASHINGTON—American Home Mortgage Investment Corp. wants bankruptcy court permission to sell pools of mortgages in which borrowers are behind in their payments and owe $164 million in principal on the loans.

The failed mortgage lender has asked the U.S. Bankruptcy Court in Wilmington, Del., to approve a Feb. 13 auction for the mortgage loans, according to court documents filed last week.

American Home has proposed to sell three pools of 618 non-performing loans in which payments are more than 60 days past due. That total could change if borrowers catch up on their payments or more fall behind.

American Home is one of many mortgage lenders that have been forced into bankruptcy due to the credit crunch. It has been selling its assets and winding down its business free credit reports. In October, the bankruptcy court approved the sale of American Home’s loan-servicing business to Wilbur Ross’ private-equity firm.

According to court papers, a pool of 83 loans are subject to liens by American Home’s bankruptcy lenders, including the entity set up by Ross to buy the loan-servicing business. Another 208 loans are subject to liens by Bank of America Corp. JPMorgan Chase & Co. has an interest in the remaining 327 loans.

American Home has proposed a Jan. 25. deadline for interested buyers to submit indicative bids and a Feb. 11 deadline for formal, binding bids.

The bankruptcy court will consider American Home’s request at a Jan. 14 hearing.

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U.S. loans for big-ticket items like cars fell in October for a second consecutive month, according to a Federal Reserve report Friday that suggested tighter lending conditions in the wake of a global credit crunch.

It was the first back-to-back decline for this type of loan since 1992.

Nonrevolving credit, which includes closed-end loans for big-ticket items such as cars, boats, college educations and holidays, declined by $1.64 billion, or 1.26%, to $1.561 trillion, the Fed said.

In addition, September’s report of nonrevolving credit was revised to show a decline of $1.37 billion from a previously estimated $363-million increase.

The data can be seen in different ways. One explanation might be that tougher lending standards mean fewer customers qualify for this type of borrowing, which is dominated by auto loans.

Financial firms have suffered heavy losses as a result of a credit crunch spurred by problems in the U.S payday loans. sub-prime mortgage market. As a result, many are being more careful in their lending. Or the declines might be driven by weaker demand for credit as consumers tighten their belts.

Overall U.S. consumer borrowing rose by $4.71 billion in October, compared with forecasts of a $5-billion rise. The increase was at an annual rate of 2.27% and took the total to $2.490 trillion, the Fed said.

This followed a downward revision to September’s credit numbers, which were trimmed to a gain of $3.21 billion from an originally reported $3.75-billion rise. August’s increase was revised upward to $20.75 billion.

Revolving credit, made up of credit and charge cards, rose $6.34 billion, or an 8.3% rate, to $928.49 billion in October. This compares to an upwardly revised September increase of $4.59 billion.

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