03 January 2009
The slump in house prices eased off in November with prices falling by just 0.4%, according to the Nationwide, the UKs largest building society.
The mortgage lender said the rate of price falls moderated significantly when compared with Octobers 1.3% fall.
House prices are down 13.9% from November 2007, easing from a 14.6% annual fall in October.
However, Nationwide warned that the poor economy would continue to put pressure on the housing market.
In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market, Nationwides chief economist Fionnuala Earley said.
With prices falling at their current rate, there is also less incentive for new borrowers to hurry into the market.
The price of an average house now stands at pound;158,442, the Nationwide said.
That amounts to a drop of pound;25,000 in the past year, although the building society says prices are still pound;25,000 higher than they were in November 2003.
Downward spiral
The past year has seen the UK property market endure one of its biggest and most sudden slowdowns on record.
It is estimated that the UK house building industry has shrunk by half since the start of the international credit crunch in the summer of last year.
Earlier this week the former head of the HBOS mortgage bank, Sir James Crosby, recommended that the government take direct action to stimulate the flow of mortgage funds to the UK banking industry.
He warned that otherwise new mortgage lending might dwindle to a complete halt.
And that in turn would lead to a further downward spiral of sales and prices which would make the impending economic recession even worse.
In evidence to a Parliamentary committee, Mervyn King, the governor of the Bank of England, said no issue was more important at the moment than the restoration of general bank lending.
David Miles, chief UK economist at the investment bank Morgan Stanley, said there had been some good news in the past few weeks.
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We have had some very substantial cuts in interest rates from the Bank of England, he said.
That will feed through to lower costs of mortgages, for those who already have a mortgage anyway, pretty soon, he added.
Source BBC |
