30/04/2008

Annual Fall For UK House Prices

Last year's property boom is well and truly over as a leading mortgage lender reports that house prices in the UK have fallen by 1% during the past year.

This marks the first year-on-year fall since 1996, according to the Nationwide building society, who said - in their report released today - that house prices have in fact fallen for the sixth consecutive month.

Fionnuala Earley, Nationwide's Chief Economist said: "April was another difficult month for the housing market. Falling levels of market activity meant that prices fell by 1.1% during the month and ended up 1% lower that this time last year.

"April's fall in prices continues the trend of the last six months and reflects the weakening sentiment in the market brought about by poor affordability and tighter financial market conditions."

The average cost of house in the UK is now £178,555, which is £1,759 lower than last year.

Ms Earley also added that the majority of borrowers were not taking out loans and most mortgage borrowers have either not been affected by recent market events of have directly benefited from cuts in the Bank Rate.

She said that borrowers who will be most affected by higher mortgage rates are those whose deals are set to expire.

"Overall, some groups of borrowers will certainly feel the effects of higher mortgage rates, but 85% of borrowers will be seeing no impact or will benefit directly from reductions in the Bank Rate this year," Ms Earley said.

The economist stressed that the current conditions were different to the collapse of the market in the 1990s which was due to a higher proportion of loans on variable rates that were hit by the sharp increase in the bank rate in the late 1980s.

The Bank of England said yesterday that the number of mortgages being approved has fallen to a "record low" during March which is 44% below figures a year ago.

David Blanchflower, a member of the Bank of England's Monetary Policy Committee is reported as saying that house prices could fall by 30% over the next few years if interest rates were not cut.

However, Ms Earley concluded in the Nationwide report that "the underlying conditions for most mortgage borrowers are more positive than some would sugggest".

(DS)


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