UK house prices fall 2.4 pct in May

LONDON—House prices fell in Britain for the fourth straight month in May, but shoppers defied a run of gloomy economic news by raising their spending by a record amount, according to reports released Thursday.

Britain's biggest mortgage lender, Halifax, said house prices fell 2.4 percent in May, extending the slump in the once-booming housing market. Average prices are now 3.8 percent lower than a year ago, when prices were still edging upward, the report said.

HBOS PLC, parent company of Halifax, said in a separate report that house prices may fall by as much as 9 percent this year. Mortgage lending declined 2 percent in May, the Council of Mortgage Lenders said in another report.

It was a different story in the shops, as spending jumped 3.5 percent in May compared to April, the Office for National Statistics said. That was the largest one-month gain since the agency began tracking retail sales in 1986.

"These retail sales figures are absolutely astounding, even allowing for the fact that food and perhaps the better weather lifting clothing sales were major factors," said Howard Archer, chief European economist at Global Insight.

The growth wasn't all in food stores, where prices have been rising rapidly. Sales volume for predominantly nonfood stores rose by 3.9 percent, the largest increase since March 1991.

For the March-May period, the agency said sales volume in food stores was up 0.7 percent

Sales volume in the three months March to May rose by 5.4 percent compared to the same period a year earlier. Sales in predominantly food stores rose 2.6 percent and 6.2 percent in nonfood stores.

The government report was in line with Monday's report from the British Retail Consortium that retail sales in central London were up 8.2 percent in May compared to a year ago.

"Despite May's reported surge in retail sales, we maintain our belief that the prospects for consumer spending over the coming months are pretty bleak," Archer said.

"Disposable income growth is muted, while purchasing power is being squeezed significantly by rising utility bills and elevated food prices, and also by higher mortgage repayments for many householders as a result of the credit crunch."

The Council of Mortgage Lenders said mortgages worth 25.5 billion pounds (US$32.2 billion) were issued in May, down 2 percent in April and 19 percent less than a year earlier.

"The remortgage market remains on track to meet our forecast for growth this year, demonstrating the resilience of the market despite recent bad news. However, by comparison, the next few months will remain very weak for house purchase activity," said Michael Coogan, the council's director general.

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On the Net:

Halifax House Price Survey, http://www.hbosplc.com/economy/HousingResearch.asp

Office for National Statistics, http://www.statistics.gov.uk

Council of Mortgage Lenders, http://www.cml.org.uk