UK house prices fall 0.4% in November

House prices fell by just 0.4% in the month compared with 1.3% in October, according to the Nationwide Building Society. This brings the annual rate of house price falls to 13.9%, down from 14.6% last month.

The price of a typical house is now £158,442. This is about £25,000 less than this time last year but is still about £25,000 higher than in November 2003.

Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: "In spite of the moderation in house price falls recorded in November, with the economy in recession, conditions do not appear very favourable for a swift recovery in the housing market. The labour market is weakening, which will inevitably hinder market demand, particularly when property remains expensive relative to earnings. With prices falling at their current rate there is also little incentive for new borrowers to hurry into the market. However, there are a number of measures which should provide some support to the market in general and help existing and potential homeowners in these difficult times.

...but falling interest rates will soften the impact

"The Monetary Policy Committee's decision to reduce interest rates by 1.5% at the November meeting took most commentators by surprise. It was a bold step and has left no doubt that the focus of their concerns has shifted from inflation to deflation. While not aimed directly at the housing market, such a substantial shift in the Bank Rate will help a significant number of existing and potential homebuyers. Different borrowers will be affected in different ways by rate cuts. The estimated one-third of borrowers on tracker mortgages will have benefitted one-for-one from base rate cuts. About one fifth of borrowers are on their lender's standard variable rate (SVR). Although SVRs do not change automatically when the base rate moves, most lenders have so far passed on a large part of the Bank of England's 2.75% worth of base rate cuts since December 2007. Finally, while the roughly 50% of borrowers on fixed rate deals will not benefit immediately from rate cuts, they will face much less of a payment shock when they come to the end of their deals.