Business

House prices still falling slowly, says Nationwide

Houses
Image caption Prices have fallen gently, while sales have been rising

House prices are still falling slowly, according to the latest figures from the Nationwide building society.

Its latest monthly survey says average prices have been unchanged this past month at just under £164,000, and are 1.2% lower than in November last year.

For each of the last nine months, prices have been lower than they were in the same month a year earlier.

The Nationwide's economist, Robert Gardner, said the underlying position of the house market was in fact stable.

"UK house prices were unchanged over the month in November, after taking account of normal seasonal factors," he said.

"Moreover, annual price growth has remained in a narrow band between +1.5% and -1.5% on all but two occasions over the past two years."

Deposit problems

A key factor in preventing house prices from falling much faster, he said, had been the fall in unemployment in the past year, to just over 2.5 million people, despite the fact that the economy has recently been in its second official recession in the past four years.

"The UK labour market has performed much better than expected since the onset of the financial crisis, and this in turn has provided significant support to the housing market," he said.

"The resilience of employment together with the ultra low level of interest rates has been instrumental in preventing a glut of unsold homes from building up on the market and exerting sustained downward pressure on house prices."

Judging by the Nationwide's index, average house prices in the UK, despite fluctuating in the past six years or so, are now no higher than they were back in April 2006.

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Cheap funds

Property sales in the first 10 months of the year in the UK have been running 7% higher than in the same period last year, despite the continued severe rationing of mortgage funds by lenders.

The number of mortgages approved for house purchases climbed slightly in October, according to the Bank of England.

The figures, released late on Wednesday, showed that there were 52,982 approvals, up from 50,415 the previous month and higher than the average of the previous six months.

The government hopes that the Funding for Lending Scheme (FLS), launched by the Bank of England at the start of August, will channel cheap money to lenders who will then make mortgage funds more easily available to borrowers.

So far though there has been little evidence of that happening.

The main beneficiaries seem to have been borrowers who have large deposits, who are now being offered even cheaper loans than before, but there has been little improvement in the supply of funds to people who can only put down a small deposit.

"Those with far more modest deposits are crying out for better rates," said Jonathan Harris, director of mortgage broker Anderson Harris.

"The deposit is the biggest single barrier to home ownership, with first-time buyers having to delay getting onto the housing ladder until they are well into their 30s if they can't call upon the bank of mum and dad to help.

"However, we do expect the FLS to filter through to those with more modest deposits next year which will give the housing market a much-needed kickstart," he added.

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