Annual house price inflation falls 1%

Nationwide’s latest house price index shows that in April, the cost of a UK home fell by 1.1% month-on-month.

According to the lender, house prices have declined for the sixth consecutive month and the annual rate of inflation is now -1% below April 2007, marking the first fall in annual house price inflation for 12 years.

An average home now costs £178,555, or £1,759 less than in April 2007.

According to Fionnuala Earley, Nationwide’s chief economist, higher mortgage rates, tighter lending criteria and a reduction in the number of first-time buyers are all playing their part in what has become a buyers’ market.

She believes that the Bank of England’s recently announced £50 billion Special Liquidity Scheme should ease the lending constraints resulting from a shortage of cash on the wholesale money markets.

However, Ms Earley is not optimistic about interest rate cuts because rising oil and food prices are likely to mean that the Bank will make further reductions in the base rate slowly.

Nationwide estimates that over five million borrowers have directly benefited from Bank of England’s three base rate cuts since December of last year.

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