Nationwide: House prices slide

HOUSE prices fell 0.4% in October, according to Nationwide building society. The news stoked expectations that rising interest rates have finally ended the UK's property boom.

It also marks the first monthy fall in UK property values in the Nationwide index since October 2001 - when confidence was shattered by the 9/11 terrorist attacks on the US - and the biggest drop since February 2001, when values slid 0.5%.

The decline brought the average price of a home down to £152,159 from £153,727 in September and 2.5% lower than the peak of £154,299 in July.

The annual rate of increase in October was 15.3%, down from 17.8% last month.

Nationwide's figures confirm wider signs of a slump in property demand. The National Association of Estate Agents said values fell 1.6% in September, while the Royal Insitution of Chartered Surveyors said prices were falling at their fastest rate in nine years. And this week, property analyst Hometrack reported a 0.6% fall in October – the fifth monthly drop in a row.

However, figures from the Halifax, the UK's largest mortgage lender, have given conflicting signals. It said house prices fell 0.6% in August but bounced back to rise 1.4% in September. The bank is expected to publish its latest survey either tomorrow or on Monday.

Given the latest downturn, most economists have ruled out another interest rate rise this year. The Bank of England has raised the UK base rate from a low of 3.5% last year to 4.75% at the last change in August.

Experts had then expected rates to climb to 5% or 5.25% by the end of the year as the monetary policy committee attempted to cool Britons' thirst for borrowing and buying homes.

'Given the Bank of England's concern that the housing market slowdown could turn into an 'abrupt' correction, it seems ever more likely that the Bank will leave interest rates unchanged for an extended period,' said Howard Archer, economist at Global Insight.

Some economist have even been speculating about possible rate cuts next year.

A confidence index from Nationwide also showed sentiment on the slide, with only 40% expecting price rises over the coming months, down from nearly two-thirds who believed that back in June.

'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,' said Alex Bannister, economist at Nationwide.

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