Page last updated at 12:21 GMT, Saturday, 19 July 2008 13:21 UK

House prices 'will keep falling'


Robert Peston talks to Citigroup's Sir Win Bischoff

House prices in the UK and the US are likely to fall for another two years, the chairman of one of the world's most powerful banks has warned.

Sir Win Bischoff of Citigroup told BBC Business Editor Robert Peston he expects it will take two years for the markets to "stabilise".

Sir Win also expected the credit crunch - fraught conditions in financial markets - to continue through 2009.

Citigroup lost $2.5bn (1.25bn) in the three months to the end of June 2008.

The figures were less than analysts had been expecting.

Nonetheless, the announcement took cumulative losses at the bank - until recently the world's largest - to $17bn (8.5bn) over the previous nine months.

Sir Win told the BBC that there would be redundancies at the bank, which employs 12,000 in the UK - some of them compulsory.

Our correspondent said the remarks by Sir Win, who chairs one of the largest consumer banks in the world, carry weight.

Citigroup is shedding assets and cutting costs by shedding staff to cope with the new financial conditions.

The interview was broadcast on the BBC News Channel at 2230 BST, in the first of a new series of interviews with business leaders, called Leading Questions.

Sir Win's warning comes against a backdrop of gloomy forecasts elsewhere.

One of Britain's major mortgage lenders, Halifax, has also claimed that house prices are falling at their fastest rate since the 1990s house price crash.

During the past year it said properties had lost 6.1% of their value.

But the credit crunch has made it difficult for buyers, especially first-timers hoping to get on the property ladder, to get a mortgage.

'Rent first, buy later'

This has spurred Halifax and other major lenders including Nationwide and Abbey to announce some cuts in mortgage rates to try and help existing borrowers.

The Royal Institution of Chartered Surveyors, which records the numbers of people moving house, says the figures are at their lowest level since they started collecting the data in 1978.

Last week Housing Minister Caroline Flint announced a series of government measures to try and combat the problem.

These include a "rent first, buy later" scheme for some in England whose household earnings are less than 60,000.

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