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UK house prices see annual fall UK house prices see annual fall
(20 minutes later)
House prices in the UK have recorded their first annual fall for 12 years, according to the Nationwide.House prices in the UK have recorded their first annual fall for 12 years, according to the Nationwide.
Prices fell by 1.1% in April, the sixth monthly decline in a row, and were down 1% from the levels seen in April 2007, the building society said.Prices fell by 1.1% in April, the sixth monthly decline in a row, and were down 1% from the levels seen in April 2007, the building society said.
Nationwide said the price falls reflected a weakening market which had been hit by "poor affordability and tighter financial market conditions".Nationwide said the price falls reflected a weakening market which had been hit by "poor affordability and tighter financial market conditions".
An average home now costs £178,555 which is £1,759 lower than April 2007.An average home now costs £178,555 which is £1,759 lower than April 2007.
'Cautious consumers''Cautious consumers'
"April was another difficult month for the housing market," said Fionnuala Earley, Nationwide's chief economist."April was another difficult month for the housing market," said Fionnuala Earley, Nationwide's chief economist.
She said that there had been a "steep decline" in house buying in the last six months owing to falling demand from first-time buyers, higher mortgage rates and tighter lending criteria.She said that there had been a "steep decline" in house buying in the last six months owing to falling demand from first-time buyers, higher mortgage rates and tighter lending criteria.
The rise in unsold property on the market improved the bargaining power of buyers which pushed down prices.The rise in unsold property on the market improved the bargaining power of buyers which pushed down prices.
She said that this was likely to have a knock-on effect on the wider economy, with consumers becoming more cautious.She said that this was likely to have a knock-on effect on the wider economy, with consumers becoming more cautious.
But rising oil and food prices meant that the Bank of England would "prefer to cut rates at a more gradual rate than homeowners might prefer", she predicted.But rising oil and food prices meant that the Bank of England would "prefer to cut rates at a more gradual rate than homeowners might prefer", she predicted.
'Not the 90s''Not the 90s'
The figures come the day after the Bank's own data showed that new mortgage approvals had fallen to their lowest level since records began in 1990.The figures come the day after the Bank's own data showed that new mortgage approvals had fallen to their lowest level since records began in 1990.
Other surveys suggested a sharp fall in prices in March
This was partly owing to the difficulty for first-time buyers in finding a mortgage deal without a significant deposit.This was partly owing to the difficulty for first-time buyers in finding a mortgage deal without a significant deposit.
But the fall in prices, down 1.8% over three months compared with the previous quarter, will be welcomed by some new buyers who have seen prices rocket up by 45% in the past five years.But the fall in prices, down 1.8% over three months compared with the previous quarter, will be welcomed by some new buyers who have seen prices rocket up by 45% in the past five years.
"Prices have been rising consistently in the last four of five years, so a bit of a fall is due. It is what markets do," said Peter Rollings, managing director of Marsh and Parsons Estate Agents."Prices have been rising consistently in the last four of five years, so a bit of a fall is due. It is what markets do," said Peter Rollings, managing director of Marsh and Parsons Estate Agents.
And Ms Earley added that the housing market was very different to the situation in the late 1980s and early 1990s.And Ms Earley added that the housing market was very different to the situation in the late 1980s and early 1990s.
"The underlying conditions for most mortgage borrowers are more positive than some would suggest," she said."The underlying conditions for most mortgage borrowers are more positive than some would suggest," she said.
Bank planBank plan
The Halifax said that prices fell by 2.5% in March compared with the previous month, and the rival mortgage lender is set to release its figures for April in the next few days.The Halifax said that prices fell by 2.5% in March compared with the previous month, and the rival mortgage lender is set to release its figures for April in the next few days.
Nationwide's Ms Earley said that the Bank of England's £50bn plan for banks to swap potentially risky mortgage debts for secure government bonds was "well thought out".Nationwide's Ms Earley said that the Bank of England's £50bn plan for banks to swap potentially risky mortgage debts for secure government bonds was "well thought out".
Other surveys suggested a sharp fall in prices in March
She said it would stabilise the volatile mortgage market of the past few weeks, but it would not lead to house prices and mortgage lending returning to the levels seen this time last year.She said it would stabilise the volatile mortgage market of the past few weeks, but it would not lead to house prices and mortgage lending returning to the levels seen this time last year.
She added that, unlike the 1990s crash, more people were on fixed-rate than variable-rate mortgage deals and this helped the stability of the market.She added that, unlike the 1990s crash, more people were on fixed-rate than variable-rate mortgage deals and this helped the stability of the market.
But David Blanchflower, a member of the Bank of England's Monetary Policy Committee which sets interest rates, said in a speech on Tuesday that house prices could fall by 30% over the next few years if interest rates were not cut.But David Blanchflower, a member of the Bank of England's Monetary Policy Committee which sets interest rates, said in a speech on Tuesday that house prices could fall by 30% over the next few years if interest rates were not cut.
He added: "I am not suggesting that such a drop will necessarily occur, but it may. Cutting interest rates now may help to prevent such a dramatic fall."He added: "I am not suggesting that such a drop will necessarily occur, but it may. Cutting interest rates now may help to prevent such a dramatic fall."
A regular cheerleader for lower rates, Mr Blanchflower said "aggressive action" was needed to stop a downturn in the economy.A regular cheerleader for lower rates, Mr Blanchflower said "aggressive action" was needed to stop a downturn in the economy.
Governor of the Bank of England, Mervyn King, told MPs on Tuesday that it would be a mistake to go back to where the mortgage market was a year ago, when loans were cheaper and easier to get.