Business

UK house prices predicted to be flat for a year

Media playback is unsupported on your device
Media captionNationwide chief economist Robert Gardner: "There is significant regional variation in house prices"

House prices will stay flat or drop slightly over the next year despite a gradual recovery in the UK economy, a lender has predicted.

The Nationwide has suggested that the Bank of England's new Funding for Lending scheme, aimed at boosting credit, could support the market.

Prices fell by 1.4% in the year to the end of September, the Nationwide said.

A 0.4% drop compared to August left the average UK home valued at £163,964, the lender said.

'Caution'

More business activity and the London 2012 Olympics have helped to put some energy in the UK economy, the building society said.

However, its chief economist Robert Gardner said that there were "grounds for caution" about jobs, which were a key factor affecting movements in property prices.

The Nationwide's figures also outline UK house price changes in the third quarter of the year and show significant geographical differences.

This showed that on average, prices were down 0.5% compared with the previous quarter and 1.6% down compared with the same three months a year earlier.

While house prices had fallen by 0.3% in England, they were down 4% in Scotland, dropped 4.7% in Wales and were 9.3% lower in Northern Ireland.

Demand

The Bank of England's Funding for Lending scheme aims to ensure more mortgages are lent to people with only small deposits to put down.

It is offering to make cheap funds worth about £80bn available to banks and other lenders, on condition they lend the money to commercial and personal borrowers.

"Hopefully the Funding for Lending scheme will make sure that, if the demand is there for credit, the supply is there as well, and hopefully it will bring down the cost of mortgages," said Mr Gardner.

"What we really need to see happen is for demand to pick up. For that to take place, we really need to see the wider economy pick up."

But Mark Harris, chief executive of mortgage broker SPF Private Clients, said: "It may be too early to gauge the success of the Funding for Lending scheme, but we need it to be successful if the housing market is going to get a much-needed kickstart.

"There is already much debate, however, as to whether it will help those borrowers who really need assistance."

Related Internet links

The BBC is not responsible for the content of external Internet sites