House prices fell by 1.8% in February as confidence in the UK property market failed to pick up, according to the Nationwide building society.

Despite cuts in interest rates have lowered the cost of mortgage repayments for many, there hasn’t been a reflection of these savings in house sales. Nationwide added that the average UK property had fallen in value by 17.6% over the past 12 months, to £147,746.

- House prices fell by 1.8% in February
- More cuts in base rate expected
- Falling rates reduce existing variable rate borrowers’ typical payments by a third
- New buyers see significant improvement in affordability
- Average price of a home in Feb: £147,746, down from £150,501 in January

However, ‘curiousity’ in the house market is increasing. However, problem areas remain such as the ability to raise a larger deposit. In addition, consumers’ expectations of house price growth are still falling and this is likely to dissuade many from moving just now. However, there are some very early signs that borrowers are perhaps becoming a little more optimistic about the path of house prices. Nationwide said the pace of fall in consumers’ expectations of future house prices has moderated, which could suggest that confidence in the market may begin to pick up later this year.

Commenting on the figures Fionnuala Early, Nationwide’s Chief Economist, said: “The price of a typical house fell by 1.8% in February, bringing the annual rate of change to -17.6% and the price of a typical house down to £147,746, from £179,358 this time last year. Sharp cuts in interest rates have helped affordability, but have not yet affected housing market confidence sufficiently to boost the levels of new transaction activity or slow the pace of house price falls. Early signs of increased interest in housing, as reported by the pick up in new buyer enquiries, have yet to filter into sales, but do suggest that falling prices and interest rates are raising curiosity now, which could flow through quickly once confidence returns.

“The February Inflation Report also implies that the MPC has not finished cutting interest rates yet. First, the Bank’s economic forecast factoring in a 25bp cut, left inflation significantly below its target two years ahead and GDP contracting sharply. Second, Mervyn King clearly stated that “further easing may well be required” when asked how much further rates could fall – a sentiment subsequently echoed by other MPC members. Further cuts in rates will be welcome in the housing market, but the economic conditions that require them will mean that there is unlikely to be a swift turnaround in the housing market in 2009.”