House price inflation lowest for 19 months

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by Kay Murchie

According to figures from the Nationwide, house price growth will fall below 5% in December. In its monthly survey, the UK’s largest building society said prices in December were 0.5% lower than November - the second consecutive month that prices have declined.

Furthermore, the three-month on three-month rate of growth which, according to the Nationwide is a more realistic indication of house price trends, also fell from 1.4% last month to 0.9% in December, the lowest level for 2 years.

Consequently, the falls mean that average prices have risen 4.8% in 2007 - the lowest annual house price inflation for 19 months.

The lender said the average price of a UK house is currently £182,080 - up £8,334 on the year. Fionnuala Earley of the Nationwide said the housing market had weakened considerably towards the end of this year.

Ms Earley said most indicators now show that demand is responding to the pressures of weak affordability, past increases in interest rates and the lower house price expectations that we had expected to take hold earlier in the year.

Howard Archer, an economist at Global Insight, said it is clear that the housing market ended 2007 under mounting pressure from increased affordability pressures and tightening lending practices, and it looks set for further deterioration in 2008.

Mr Archer added the increasing risk that the housing market could be headed for a sharp correction maintains pressure on the Bank of England to cut interest rates again early in the New Year.