House prices still falling, says Nationwide

Estate agent
Image caption Wet weather has only been partly to blame for the continued recession, the Nationwide said

House prices have fallen for the fourth time in five months, says the Nationwide building society.

The fall of 0.7% in July means prices are now 2.6% lower than they were a year ago, at an average of £164,389.

On Monday, figures indicated that the property market is heading for a new downturn, with new mortgage approvals at their lowest since 2010.

The Nationwide said the decline in house prices was due to the current recession.

"The weaker price trend observed in recent quarters is unsurprising, given the disappointing performance of the wider economy," said the society's chief economist, Robert Gardner.

"The UK recession intensified in the three months to July, with the economy contracting by 0.7% quarter on quarter.

"This disappointing outturn can be only partly explained by unusually wet weather and the impact of an extra bank holiday during the quarter," he pointed out.

Sales head lower

The Bank of England's Funding for Lending scheme, which gets underway on Wednesday, has already led to a sharp cut in the cost of long-term, fixed-rate mortgages for people with at least a 40% deposit.

These deals now come with interest rates below 3%, which Mark Harris, chief executive of mortgage broker SPF Private Clients, said was "an incredible rate by anyone's standards".

"However, we don't yet know whether the Funding for Lending scheme will result in cheaper mortgages at higher loan-to-values," he added.

"So far, the best deals have been for those with sizeable deposits, which won't give the housing market the kickstart it so desperately needs."

Earlier this year the market experienced a brief flurry of sales as some homeowners brought forward their purchases to take advantage of the stamp duty holiday for first-time buyers, before it expired on 24 March.

Boosted by cash sales, where no mortgage is needed, overall house sales across the UK were 11% higher in the first six months of the year than in the same period last year.

But the number of new mortgages approved, but not yet lent - a key indicator of forthcoming trends - fell sharply in June.

At 44,192 they were down 10% on June last year and were also at their lowest level since December 2010.

This suggests that the already low levels of sales may tail off in the coming months.

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UK house prices

Year on year % change


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