House price inflation eases again, says Nationwide

Estate agent's window
Image caption Buyers are still restricted by mortgage rationing

House price inflation in the UK continued to ease off in July, the Nationwide building society has said.

Its latest monthly survey shows that prices fell by 0.5% this month, taking the annual rate of house price inflation down from 8.7% to 6.6%.

The price of the average home is now £169,347, almost the same as it was in July 2008.

Meanwhile, the mortgage market also remained subdued in June, figures from the Bank of England showed.

Mortgage restrictions

The Nationwide said price rises were easing off as more homes were being put up for sale.

"At the moment, the market is clearly easing relative to the very tight supply conditions that characterised it since early 2009," said the society's chief economist Martin Gahbauer.

"A combination of restrictive credit conditions and uncertainty about the future economic outlook continues to limit the pool of buyers to those with relatively large financial resources," he added.

Buyers typically still have to put down a deposit of at least 25% to secure a mortgage as banks and building societies continue to ration their mortgage lending in the wake of the credit crunch and banking crisis of 2007 and 2008.

The Nationwide pointed out that the number of completed home sales was still running at about half the level recorded before the credit crunch started.

Since the spring of 2009 prices had been pushed higher again, mainly by a shortage of homes coming onto the market for sale.

However, the Nationwide said it was unsure about where prices were heading.

"It will take several more months to establish whether house prices are now simply oscillating around a flat price trend or whether a period of downward trending prices may be in store," Mr Gahbauer said.

Earlier this month, the Royal Institution of Chartered Surveyors (Rics) said it expected prices to start falling in the second half of this year, as sellers started to outnumber buyers.

And Simon Rubinsohn, chief economist of Rics, reiterated that the institution still thought prices were likely to drop.

"Significantly, all the key forward looking indicators compiled by Rics suggest the headline price indices will continue to slip back during the second half of the year," he said.

"Within this overall trend, however, there will be significant regional divergences - with London, the South East of England and Scotland showing the greatest level of resilience."

Mortgage market

The mortgage market has experienced a subdued summer with a drop in approvals in June, figures from the Bank of England show.

Image caption Borrowers have been paying back their debts

The number of mortgages approved for house purchases during the month stood at 47,643, down slightly on the previous month and below the average of the past six months.

It was also 6% lower than the number during the same month a year earlier, which was the first year-on-year fall since April last year.

"It is likely to remain [negative] in future months as comparison is made with a rather stronger market towards the end of last year," said Paul Samter, of the Council of Mortgage Lenders (CML).

Remortgaging was also slack owing to current homeowners enjoying low mortgage rates and tighter lending requirements constraining others, he said.

The Bank of England figures also showed that repayments of unsecured debts outstripped new borrowing in June.

Consumers paid back £98m more than they borrowed on credit cards, personal loans and overdrafts.

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