The biggest drop in prices since 1991 has been recorded by the latest Nationwide housing survey.
The cost of property in the UK fell at its fastest rate for 17 years this month, Nationwide said today.
According to the new figures, house prices fell by 2.5 per cent in May. This means that the average home has dropped by £5,000 in a single month and that prices are now 4.4 per cent lower than they were this time a year ago. While price drops might make it easier for some first time buyers to buy a house, they might also lead to a further scaling-back of lending among mortgage firms.
Partially as a response to the falling market, Abbey and Woolwich announced that they would be raising some of the repayment rates on their home loans: a sure sign of lenders' nervousness in the current financial climate. The fact that these moves came ahead of the latest house price data might also mean that rates raising from other firms could be on the way.
Commenting on the new figures, Fionnuala Earley at Nationwide said that the faltering UK economy had exacerbated the property price decline. "The pace of house price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment in the housing market," she commented.
Speaking to news agency Reuters, Global Insight economist Howard Archer added: "The marked deterioration in sentiment over the housing market…heightens the risk that house prices will fall sharply over the next couple of years."
