Annual house price inflation declines to 1.1%

Nationwide, the UK’s largest building society, has published house price figures for March showing that the cost of a home is now just 1.1% higher than a year ago.

House prices fell 0.6% between during the month to a UK average of £179,110, although for London the average price is close to £300,000.

In March, the annual figure for property inflation declined to its lowest level since early 1996 and well below the 2.7% recorded in February.

While calls for a cut in the base rate to boost the property market continue, the governor of the Bank of England, Mervyn King, has admitted that the two reductions since December of last year have merely “offset” increased mortgage rates.

Despite the current 5.25% official interest rate, the cost of mortgages has not changed significantly since August 2007.

However, Fionnuala Earley, Nationwide’s chief economist, is keen to see a further reduction in the base rate in April, as this could improve confidence in the housing market.

She explains: “Confidence is a very important factor in the housing market and much of this is determined by expectations of the future path of house prices. When consumers think prices will rise, there is a greater incentive to enter the market, thus supporting demand. On the other hand, if prices are expected to remain static or fall, the urgency disappears and demand will fade.”

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