UK House Prices Situation: Prices down by 2.5% in May

UK House Prices Forecast: High single figure falls by end 2008

Nationwide Announces Biggest House Price Falls Since Early 1990s

House prices are an average of 4.4% lower than in May 2007, according to the Nationwide building society. This is the fastest rate of fall since December 1992, when prices were falling at an annual rate of 6.3%.

Despite house prices remaining an average of 5% higher than they were two years ago, the downwards trend is now well established says Nationwide. Prices fell by 2.5% in May - the seventh consecutive month in which the Nationwide House Price Index has recorded a fall in average house prices.

Nationwide also noted that although comparisons with the housing crash of 1989 were inevitable, it believes that most buyers are less vulnerable than they were then. This is because fewer people bought homes at the top of the market in 2007 than in 1989.

They concluded that, although painful, the current tightening of lending conditions was ultimately good news as it would deliver a "more stable and sustainable market" with "fewer overstretched borrowers".

House Sales & New Mortgages Down 40%

Both the Royal Institution of Chartered Surveyors (RICS) and the British Bankers Association (BBA) published figures this week indicating a massive slowdown in house sales and new mortgage lending.

Although these figures are hardly surprising to anyone who follows the housing market, the scale of the slowdown is still impressive. New mortgage lending by banks is down 39% from this time last year, according to the BBA. Remortgaging, on the other hand, was up 10%. This is mostly due to existing homeowners coming to the end of their fixed or tracker rate mortgages and wanting to remortgage onto new fixed deals.

RICS's forecast for a 40% fall in the number of house sales this year fits well with this trend - with prices falling, buyers will be in no rush to move and any who can are likely to wait out the market a little longer to try and get the best possible deals.

Read about UK House Price indexes / key statistics that track the ups and downs of house prices

Read our take on the Credit Crisis the effect on UK House Prices and Mortgages. A Special Report

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