The rate of house price falls has slowed in November. Prices fell by 0.4% per month, compared with 1.3% in October, bringing the annual rate of house price falls to 13.9% from 14.6% last month.
The price of a typical house is now £158,442 – about £25,000 less than this time last year, but still about £25,000 higher than in November 2003, the report states. The cut in interest rates by 1.5% at the latest meeting of the Monetary Policy Committee will also help a significant number of homeowners and homebuyers.
‘The fiscal measures announced in the Pre-Budget Statement are aimed at preventing the economy from going into a deeper recession,’ said Nationwide Chief Economist Fionnuala Earley. ‘Additional government spending, the reduction in VAT and tax and national insurance contributions for those at the lower end of the income scale may have some indirect effect on the housing market. However, this is likely to be limited unless it has a significant effect on consumers’ expectations. This seems unlikely since incomes will still be squeezed as the economy contracts.’
Commentators, however, predict that this doesn’t mean an end to falls in the future: ‘We do not take much comfort from November’s more moderate fall in house prices,’ said Seema Shah from Capital Economics. ‘Monthly house price indices are volatile. Indeed, while the 1990s housing market crash spanned over several years, the longest run of consecutive monthly house price falls was only seven months. What’s more, the apparent moderation in house price declines is contrary to anecdotal evidence which has been suggesting that house price falls have, if anything, intensified in the past 6-8 weeks.
‘Will interest rate cuts boost the housing market? We doubt it. Mortgage lenders have failed to pass on the full cuts in base rates to new borrowers, so the impact of lower interest rates on mortgage demand will have been significantly muted. In any case, with lenders still tightening lending criteria, it may be some time before potential homeowners get a chance to benefit from lower mortgage interest rates.’