House prices fell sharply in March, hardening expectations of an interest rate cut this week and prompting unusually blunt remarks on rate policy from Prime Minister Gordon Brown, whose popularity has slumped.
Halifax said on Tuesday house prices fell 2.5 percent in March, more than six times as much as analysts had forecast and the largest monthly decline since 1992, when the economy was in recession.
The drop reinforced expectations that the Bank of England will cut interest rates by 25 basis points to 5.0 percent on Thursday.
In unusually forthright comments, Brown told the BBC: "Because we've got low inflation we can cut interest rates." At 2.5 percent, inflation is in fact above the 2.0 percent target level that Brown set for the Bank of England.
Brown, who made the central bank independent in 1997, added: "People are forecasting that British growth will be higher than growth in other countries who are equally affected by what is happening."
Brown said government ministers would meet the Council of Mortgage Lenders representing banks and building societies to discuss "the kind of arrangements" needed to help homeowners.
"We will keep looking to see what we can do to be on the side of homeowners and homebuyers and also of course businesses seeking funds for investment," he said.
Brown built his reputation as a safe pair of hands on the economy as a decade of steady growth followed BoE independence.
But a poll published on Tuesday showed his popularity has fallen to its lowest level since he became Prime Minister last year.
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