UK home values fall most since ’91

Bloomberg

The average house price fell an annual 17.6 percent to 147,746 pounds ($211,000), the biggest drop since monthly data began in 1991, the mortgage lender said in a statement yesterday. Home values fell 1.8 percent on the month.

Chancellor of the Exchequer Alistair Darling is preparing to underwrite banks’ toxic assets to spur lending. Bank of England policy maker David Blanchflower said on Wednesday officials may need to do more to avoid a "protracted recession" after the bank cut the key rate to a record low of 1 percent. The U.K. economy shrank the most since 1980 in the fourth quarter.

"It is too early to say that the market has reached its trough," Fionnuala Earley, chief economist at Nationwide, said in the statement. "There is unlikely to be a swift turnaround in the housing market in 2009."

Darling wrote in a letter to the Financial Times Wednesday that banks must "clean up" balance sheets and restructure their operations. He and Prime Minister Gordon Brown are angry that firms are still rationing credit after the government provided 37 billion pounds of cash to support Royal Bank of Scotland Group and Lloyds Banking Group. "The risks of a protracted recession are clearly evident," Blanchflower said in a speech at the University of Stirling in Scotland Wednesday. "It is possible further action may be necessary to bolster confidence in our financial institutions."