First house price dip in three years

Britain's biggest building society today added to evidence the housing market is slowing rapidly, reporting the first drop in prices for three years.

Nationwide said the average price of a home fell by 0.4 per cent to £152,159 during the past month - the first decline since October 2001 and the largest since February 2001.

The year- on- year rate of increase slowed from 17.8 per cent to 15.3 per cent.

The news follows a recent slew of data suggesting the long-running housing boom has run out of steam and prices have started to slide.

Nationwide group economist Alex Bannister said some of the price fall could be attributed to the usual autumn slowdown. However, he added: "Nevertheless-this has been a period of marked deceleration in house price growth and is in part a result of 'real' factors, such as weak real take-home pay growth, rising interest rates and stretched affordability, acting as a drag on the market."

Reduced expectations of rising prices, less demand from buytolet landlords and a deterioration in affordability for both firsttime buyers and existing homeowners, who are now facing a tough time trading up, have also taken their toll.

Nationwide maintains its view that prices are more likely to grow at a very subdued rate rather than fall sharply, although it does not rule out more declines in isolated months. Mr Bannister said: "Our view is that the current moderation in price growth expectations will not translate into widespread panic and that instead the market will experience subdued levels of turnover."

Today's report comes a day after Government figures showed court actions to repossess homes have leapt to a four-year high, in a sign that over-stretched property owners are struggling to cope with increased mortgage rates. The Bank of England has lifted interest rates five times - from 3.5 per cent to 4.75 per cent - since last November.

The number of court actions by lenders to seize homes climbed to 18,513 over the July to September period. That was up 15 per cent from a year earlier and the highest since the start of 2000.