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First decline in British home prices in 2 years

LONDON – BRITISH house prices fell for the first time in two years this month, led by declines in central London, a survey showed.

The average cost of a home in England and Wales fell by 0.1 per cent to £176,100 (S$527,400) from September, a poll of 6,000 real estate agents by Hometrack found.

Prices in central London and the financial district fell by 0.5 per cent, the most of any part of the country. The report adds to evidence that a decade-long property boom is petering out.

Consumers are struggling to shoulder a record debt burden of £1.4 trillion after interest rates rose to a sixyear high and a worldwide increase in credit costs threatened jobs and bonuses at banks.

The interest rate on a mortgage fixed for two years was 6.33 per cent last month, compared with 5.41 per cent a year earlier, according to the Bank of England. The central bank has raised its benchmark rate five times since August last year to 5.75 per cent, the highest among Group of Seven industrial nations.

As United States sub-prime mortgage losses spread to Europe, London banks and investment firms may cut jobs and bonuses, which helped to fuel a tripling of house prices over the past decade.

About 6,500 bankers and fund managers may lose their jobs next year in the biggest cuts since 2000, and bonuses may fall by almost a fifth to £7.4 billion, the London-based Centre for Economic and Business Research said.

Source: BLOOMBERG NEWS (The Straits Times 30 Oct 07)

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