Further evidence of the severe slowdown in house price inflation emerged yesterday from Nationwide reporting the lowest rise in house prices in over two years. In addition the Bank of England revealed continuing falls in mortgage lending.
Nationwide said prices slipped half a percentage point in February, taking the annual rate for house price inflation down from 4.2% to 2.7% - the weakest for 27 months which means that the average house has lost more than £6,500 since October.
The fourth consecutive month of falling prices reduced the average cost of a home to £179,358.
The three-month figures, which are considered to give the most accurate picture of the state of the market, showed a 1% fall in prices, down from a 0.4% drop last month.
But Fionnuala Earley, Nationwide's chief economist, said it was no surprise prices had fallen, given recent low levels of mortgage approvals and fall-off in interest from buyers. "This reluctance on the part of buyers is not surprising given uncertainties in the market, and it is unlikely we will see levels of activity returning to trend levels for some time," she said.
Mortgage approvals for new house purchases remain 40% lower than a year ago. Growth in mortgage lending slipped to £7.4bn in January, compared with £7.9bn in December, confounding City expectations of an £8.1bn rise. The annual rise of 9.7% is the weakest since October 2001.
With the property market starting to deteriorate in all areas, analysts are predicting that it will not be long before house prices see falls of up to 5%.
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