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House prices 'fall another 1.8%'
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.
The lender said that the average UK property had fallen in value by 17.6% over the past 12 months, to £147,746.
Although cuts in interest rates have made mortgage repayments cheaper for some, this has yet to be seen in increased sales, it said.
But it added that "curiosity" in the market was growing.
Nationwide's chief economist Fionnuala Earley said that falling prices and interest rates meant sales could pick up quickly once confidence returned.
But she said that this might not be for some time yet.
"Further cuts in [interest] 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," she said.
Mortgage costs
The figures come shortly after figures from the major banks suggested that mortgage approvals in the UK rose slightly in January.
Fionnuala Earley
Nationwide chief economist
However, the British Bankers' Association's mortgage figure was still 43% lower than the same month a year earlier.
This shows how much weaker the housing market has become compared with a year ago, despite falling mortgage costs.
Existing borrowers on variable rate deals have seen their mortgage payments fall by about a third since the end of 2007, or £240 a month on average.
Nationwide said that borrowers in areas of the UK with the highest house prices had seen the biggest falls in their mortgage repayments.
Homeowners in London were benefiting from monthly cuts in their bills of £350 since the end of 2007, compared with about half this amount for those in the north of England.
"It is too early to say that the market has reached its trough, given the economic recession. However, falling house prices and interest rates have made the situation for borrowers today much easier than it might have been," said Ms Earley.
First-time buyers
She added that high up-front deposits currently being demanded by lenders were proving a "constraint" on first-time buyers entering the market, despite the lower monthly repayment costs.
Borrowers needed to put down at least 40% of their home's value to qualify for a fifth of mortgage deals.
The expectation of further falls in house prices was leading to some potential buyers delaying any entry into the housing market.
However, she suggested that confidence in the market could begin to pick up later in the year, with consumers becoming "a little more optimistic" about the path of house prices.
"While lower interest rates alone will not lead the housing market to suddenly pick up, more affordable loans will provide support for both new and existing borrowers in the weak economic environment," said Ms Earley.
Market experts are expecting prices to keep falling this year, probably until the economy stops shrinking, with continued restrictions on credit reducing the number of people taking out mortgages.
But David Smith, senior partner at Dreweatt Neate estate agents, suggested there was some activity for high-value purchases.
"Although there are clearly still financing issues for the first-time buyer, people who are unaffected by the broader economic turmoil, specifically those at the higher end of the market, sense an opportunity and are now making their move," he said.
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Print 2009-02-27
