More gloomy news on the property market has emerged as a new survey reveals further price declines.
UK house prices continued their downward trend this month, according to the latest figures from Nationwide. Its monthly survey shows that property prices have fallen by 1.4 percent in October, pushing up the annual rate of decline to 14.6 percent.
The average UK property now costs £158,872 - almost £30,000 less than the same month last year. Nationwide said a drop in sales volumes has driven the slump in prices as consumers struggle to secure mortgage finance. Indeed, transactions as a proportion of the total stock of mortgages are now at their lowest since the building society's series began in 1974.
"A looming recession and continued financial market instability have uncomfortable implications for the housing and mortgage markets, and will undoubtedly affect the pace of recovery in house prices," said Nationwide's chief economist Fionnuala Earley.
The Bank of England has warned that if prices drop 15 percent from their October 2007 peak, one in ten mortgage borrowers could find themselves in negative equity. This means that over one million UK homeowners would have outstanding mortgage debt higher than the value of their property.
However, Ms Earley said there may be some hope for borrowers on variable rate mortgages and those coming to the end of their fixed rate deals, as the pace of the economic slowdown coupled with continued instability in the financial markets mean sharp cuts in interest rates are likely.
