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Finance

Annual house price growth falls for first time in decade

30/04/2008

Annual house price inflation in the UK has fallen for the first time in 12 years, the latest index has shown.

Nationwide building society said prices fell 1.1 per cent in April, the sixth consecutive monthly fall, and dragged annual growth into the red – with prices down one per cent since April 2007.

This is the second survey to find prices falling year-on-year, following research from Hometrack released earlier this week.

According to Nationwide, the average property in the UK now costs £178,555, down from £179,110 in March.

"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," explained Fionnuala Earley, Nationwide's chief economist.

"The latest fall in house prices follows from the steep decline in house purchase transactions over the last half year.

"As a result of falling demand from first-time buyers, higher mortgage rates and tighter lending criteria, the number of mortgages approved for house purchases has fallen to record lows."

Yesterday the Bank of England reported mortgage approvals had fallen to the lowest level since 1993.

However, the Bank's role is to maintain a grip on inflation and consequently is unlikely to cut interest rates.

"The risk that the current strength of oil and food prices could feed into wages means that the monetary policy committee (MPC) will probably prefer to cut rates at a more gradual pace than homeowners might prefer," Ms Earley.

The MPC has cut the base rate of interest three times in recent months, in December, February and April, bringing it down to five per cent.