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a fall in house prices

 

According to the Nationwide building society, house prices fell at their sharpest rate for more than twelve years in November. The mortgage lender reported that the cost of an average home fell by 0.8% during the month. This is the first time that the Nationwide have reported a decline since February 2006 and their biggest since June 1995. This is after the society reported a growth of 1.1% in house prices the previous month, when other market analysts and compatriots Halifax were citing a fall.

This report ties in with the predicted slowdown of the UK housing market, caused by the so-called 'global credit crunch' and the market exclusion of first time buyers. It takes the annual rate of growth down to 6.9% from 9.7% in October; it's weakest since August 2006. All this of course puts pressure on the Bank of England to cut interest rates by 0.25% to 5.5% in December as sterling fell against the dollar (by 0.7%) and the euro (by 0.2%) after the report was released.

 

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For most of the coming year, Nationwide are predicting house prices to stay unchanged, but much more gloomier predictions of a fall by as much as 7% have come out of some financial markets. "November's data confirms that the housing market is indeed cooling," said Fionnuala Earley, Nationwide's chief economist. "Poor affordability, weaker house price growth expectations and the effect of earlier increases in interest rates have all affected demand in the market."

 

"Looking forward, it is clear that there are uncertainties in the market, not least from the continuing turmoil in the UK's financail markets and the overall impact that this may have on the future performance of the UK economy," Earley said.

As always with these reports and predictions there is invariably some other statistics that defy the general trend. These came in the shape of the mortgage statistics for October, released by the bank of England shortly after the Nationwide report came out. These statistics cited almost 194,000 mortgage approvals and, although there was a fall of 3% against September's figures, this was due to seasonal trends as the property buying season tails off towards the end of the year. In fact, approvals were higher by 7% than mortgage approvals in October 2004.