Banking giant Halifax yesterday reassured homeowners that a crash in the UK property market was unlikely after forecasting a two per cent fall in house prices this year.
Halifax said the housing market remained "sound" as interest rates are low and set to fall to 4.25 per cent by the end of this year, employment is higher than in 2004 and mortgage payments account for only a fifth of the incomes of new buyers.
Data released by Halifax show that house prices were unchanged during the first six months of 2005 - in contrast to the 160 per cent increase over the previous nine years when the average cost of a property in the UK leapt from £61,564 to £162,850.
Halifax said: "Past major housing market downturns have all been caused by a combination of economic recession, steeply rising unemployment and significant rises in interest rates directed at controlling retail price inflation.
"There is very little likelihood of a similar combination occurring over either the short or medium term."
Its expectations of a soft landing in the UK property market mirrored those of the Centre for Economic and Business Research (CEBR), which expects house prices to fall five per cent by 2007.
Updating its annual economic forecasts, the Halifax said the number of property deals in England and Wales will fall to 1.4 million this year from 1.79 million in 2004.
Halifax also offered hope that first-time buyers could return to the market in larger numbers as earnings are rising at a faster pace than house prices for the first time in four years.
Lower interest rates will help with Halifax predicting that rates will fall to 4.25 per cent by the end of this year.
