House prices fell by 0.5% in February, the fourth fall in a row, bringing the annual rate of house price inflation down from 4.2% to 2.7% says the latest report from Nationwide.
The annual growth rate is weakening, said the lender, although not quite as dramatically as it appears if last years incredibly strong February figures are born in mind. The three month rate of change fell to -1% in February, and the average price of a house now stands at £179,358.
The report says the MPC seems hawkish about further falls in interest rates, but also that a slowing of the economy was always likely following the upward trend of recent years: Even without the recent shocks to the financial markets, after a decade of growth averaging almost 3%, it should not be surprising that we are entering a slower phase. It is encouraging that the outlook is one of just that, slower economic growth rather than recession, it says.
The document also goes on to say that the health of the housing market is historically affected by the health of the economy, implying that no recession should mean no housing market crash.
Overall it seems clear that we will not see recent rates of growth, in either the UK economy or housing market, repeated for some time. There is currently an unprecedented amount of uncertainty about future economic conditions, but if the Bank of Englands central projection that the economy continues to grow is correct, conditions for the UK housing market are perhaps less gloomy than some would have us believe, it concludes.