House prices have largest annual fall

The price of a typical house fell by 1.7% in July, but have experienced their biggest annual fall since Nationwide began its housing survey in 1991.

Nationwide found that house prices have fallen for nine consecutive months and are at their lowest levels since August 2006. The price tag of an average home now stands at £169,316, it added.

While consumers are holding back on home purchases, Nationwide found that swap rates, the rates that determine mortgage rates have slightly dropped, allowing new fixed rate mortgage deals to come down in cost.

Most notably, there are now 41% fewer first time buyers now than at the same time last year, which may be due to expectations of further falls in house prices or to frustration in obtaining finance from lenders.

Main Points
- The price of a typical house fell by 1.7% in July
- The price of a typical house is now £15,000 lower than this time last year
- Housing purchase activity reaches a new low
- Weakening economic conditions raise the likelihood of earlier interest rate cuts

Commenting on the figures Fionnuala Earley, Nationwide’s Chief Economist, said: “The price of a typical house fell by 1.7% in July, bringing the annual fall to 8.1%. This brings the average price to £169,316, almost £15,000 less than this time last year and its lowest level since August 2006. House prices have now been falling for nine consecutive months, but on average are still almost £11,000 higher than three years ago.”

“As the cost of mortgages begins to come down, activity could be bolstered and restore some liquidity to the housing market. However this is not likely to happen overnight. Overall the weakening economy and poor housing market sentiment do not suggest that the market will recover quickly. But, if oil prices continue to fall and the Bank of England is satisfied that its inflation credentials are intact, the possibility of earlier rapid cuts in interest rates.”
increases, which would be good news for borrowers.”