House Prices Fall In July And Home Loans Fell Too

House prices fell by 0.5% in July the latest Nationwide House Price Index shows. Mortgage lending declined in June also, as housebuyers were reluctant, or unable, to purchase property.

The price of a typical UK property declined by 0.5% in July as demand from house buyers remains subdued. This fall means that annual house price inflation is also slowing – down from 8.7% in June to 6.6% in July.

The average house now costs £169,347 compared to £170,111 in June and the number of properties changing hands across the UK is still running at only half the levels seen prior to the financial crisis and recession.

Commenting on the figures Martin Gahbauer, Nationwide’s Chief Economist, said: “A combination of restrictive credit conditions and uncertainty about the future economic outlook continues to limit the pool of buyers to those with relatively large financial resources. Many potential buyers still lack the confidence to purchase their first home or trade up when faced with uncertainty over future income and employment prospects.”

The gross mortgage lending figures from the Bank of England for June also show a small decline with the number of loans approved falling by 4% compared to May. The number of approvals for both house purchase and remortgaging were also lower than in June 2009.

“This low demand is being driven both by the lack of demand among those existing borrowers enjoying low rates, and tighter criteria that may be constraining those borrowers who do wish to remortgage.”, said CML economist Paul Samter.

The falls in house values reported by the Nationwide and the decline in mortgage lending point towards the housing market remaining flat for the rest of the year, although there will be regional differences in performance, suggests Simon Rubinsohn, Royal Institute of Chartered Surveyors (RICS) chief economist, who said:

“Significantly, all the key forward looking indicators compiled by RICS suggest the headline price indices will continue to slip back during the second half of the year. As a result, our expectation continues to be that the annual rate of house price growth in the Nationwide index will be around 2 per cent in the final quarter of 2010 compared with 6.6 per cent at present and a recent high of 10.5 per cent in April. Within this overall trend, however, there will be significant regional divergences – with London, the South East and Scotland showing the greatest level of resilience.”