By Jennifer Ryan Dec. 1 (Bloomberg) -- U.K. house prices dropped to the lowest level in almost three years in November as banks starved the property market of credit, Hometrack Ltd. said. The average cost of a home in England and Wales fell 8.1 percent in the past 12 months to 161,400 pounds ($248,000), the lowest since January 2006, the London-based property researcher said in a statement today. Values declined 1.1 percent on the month, compared with a 1.3 percent drop in October. Prime Minister Gordon Brown urged banks to free up credit last week as political pressure mounts for him to implement measures to force them to lend. The Bank of England will cut the benchmark interest rate this week to 2 percent, the lowest since 1951, as policy makers combat the recession and the housing- market slump, economists say. “A weak economic outlook and limited availability of mortgages are set to keep prices under downward pressure in 2009,” Richard Donnell, the group’s director of research, said in the statement. “The market has been stripped back to the bare bones.” In East Anglia, prices fell 1.6 percent on the month, the biggest decline among the 10 regions surveyed. Prices in London fell 1.2 percent, compared with a 1.6 percent drop in October. Average values fell across 70 percent of the nation, Hometrack’s report showed. U.K. mortgage approvals probably fell to 32,000 in October, matching the lowest since at least 1999, according to the median forecast in a Bloomberg News survey of 30 economists. The Bank of England will publish that data at 9:30 a.m. in London today. Recession Forecast The Organization for Economic Cooperation and Development said Nov. 25 that the U.K. economy may contract by 1.1 percent next year, the most since 1991. Chancellor of the Exchequer Alistair Darling pledged last week to do “whatever is necessary” to get banks lending again. Bank of England Governor Mervyn King refused to rule out nationalizing financial institutions to revive credit. Policy makers lowered the benchmark interest rate last month to 3 percent, the lowest since 1955. All 60 economists in a Bloomberg News survey forecast the central bank will reduce the rate at least half a percentage point at its meeting on Dec. 4. The median prediction is for a 100 basis-point reduction. To contact the reporter on this story: Jennifer Ryan in London at Jryan13@bloomberg.net

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