Nationwide has updated it’s house price prediction for the year ahead after revealing that UK house price inflation has fallen to its lowest rate for 12 years.

Conditions in the financial markets became more difficult during March, Nationwide said, adding to stresses for not only the property markets but also for the Bank of England.

Nationwide said that the average price of a home in the UK for March was £179,110.

Fionnuala Earley, Nationwide’s Chief Economist, said: “House prices fell for the fifth consecutive month in March. The price of a typical house fell by 0.6% during the month, bringing the annual rate of house price growth down to 1.1% – its lowest rate since March 1996.

A clear change in sentiment since the late summer has led to the sharp slowing in house price growth, even in the less volatile 3-month on 3-month series. Prices on this measure are now 1.5% lower than three months ago. The price of a typical house in the UK is now £179,110, only £2,027 more than this time last year. However, prices are still 11% higher than two years ago and 47% higher than five years ago – the equivalent of a price rise of more than £30 per day for the last five years. ”

Matter of confidence
Natiowide said that it also expects confidence in the market to fall further, with the timing of the credit crunch, Northern Rock and less affordability hitting home to buyers and sellers. Many consumers are now expecting an annual fall of 3% in house prices in the next six months. However, current data suggests that while many expect a fall to occur, more than two thirds of consumers believe that house prices will be the same or even higher.

Downbeat outlook
On future predictions Nationwide said: “The outlook for UK house prices is clearly more downbeat than at the time of our November forecast. Some of the downside risks we identified then have become a reality – most notably the continued turmoil in the financial markets. However, the path for house prices in 2008 still looks set to remain within our forecast range. We expect a modest fall in house prices during the year, but such a fall should be seen in context. If prices were to fall in line with consumers’ expectations, they would still be higher than two years ago. A moderate fall in prices at
this stage should not be unwelcome and should help to ensure greater stability in the market going forward.”