Nationwide house price index down an annual 17.6%

Nationwide has reported a 1.8% fall in UK house prices, in February.

The lender’s monthly index puts the average cost of home at £147,746, or 17.6% less than a year ago (£179,358).

The building society’s chief economist, Fionnuala Earley, suggests that a combination of falling prices and interest rates could mean that when confidence returns to the market, sales will pick up quickly.

However, while past and future rate cuts are welcome in the housing market, Ms Earley points out that “the economic conditions that require them will mean that there is unlikely to be a swift turnaround in the housing market in 2009″.

Nationwide has also reported that falling interest rates have reduced costs for borrowers on existing standard variable rate (SVR) deals by around one-third.

Since December 2007, repayments will have fallen by £226 for the average homeowners on an SVR.

Despite improvements in affordability and a rise in new buyer inquiries reported recently by the Royal Institution of Chartered Surveyors, UK mortgage lending remains incredibly tight.

In recent days new measures aimed at restoring lending and kick-starting the housing market have been announced.

Northern Rock is to resume new mortgage lending, taking on £14bn in new loans by 2011, and will also be offering loan-to-value ratios of up to 90%.

RBS has confirmed today that under the terms of a new package of support from the Government, it will lend an additional £25 billion during the next 12 months.

The new lending will be spread across individuals and businesses but some of the money should be available in the UK mortgage market.

Lloyds Banking Group is expected to sign up to similar terms before the week is out.

Discuss this in the Finance Markets forums

Story link: Nationwide house price index down an annual 17.6%