Lloyds TSB warns prices could fall 10%

Lloyds TSB has warned house prices could see a sharp correction over the coming months.

In line with other predictions in the market the high street bank now estimates prices will fall ten per cent by the end of 2009.

This mirrors assertions from Hamptons International estate agents, which argues in the worst case scenario prices could fall 25 per cent by the end of next year, but actual drops are likely to be in single figures.

The bank made the prediction while announcing its first-quarter update.

Lloyds confirmed it will not follow Halifax Bank of Scotland (HBOS) and Royal Bank of Scotland (RBS) in asking shareholders to contribute to liquidity through a rights issue.

Instead the company detailed it has maintained its strong liquidity and funding position, and remains on track to deliver a good performance in the first half of 2008.

This comes despite a £387 million in writedown, based on exposure to credit products held in its trading portfolio.

However, this confidence does not extend to the housing market.

"We think there’s likely to be a ten per cent reduction in prices over 2008 and 2009," said the company's acting finance director, Mr Tookey.

Chris O'Toole