Another house price drop for December

Written by renxue January 09, 2008 14:00

The Nationwide Building Society has reported a drop in house prices for December, which is further evidence of the downward spiral in house prices across the UK according to experts. After a drop of 0.8% in November, house prices slid by a further 0.5% in December state Nationwide officials. However, on a year on year basis house prices for December were still up by 4.8% compared to December of last year.

Officials from Nationwide have stated that the recovery of the market could be aided to some degree by the recent interest rate cut announced by the Bank of England earlier this month. One Nationwide official stated: "The housing market has weakened significantly in the closing months of 2007 after holding up more strongly than expected in the earlier part of the year."

According to Nationwide further interest rate cuts in the coming year could help to improve demand in the housing sector. However, experts are quick to point out that the recovery is unlikely to be as significant as the one seen in 2005 after interest rates were cut.

The Nationwide official stated: "This is mainly because housing affordability is starting from a much worse position than in 2005, while interest rate cuts have started from a higher and more restrictive level."

Many industry experts expect the Bank of England to cut interest rates further in the New Year to help the ailing economy and struggling housing market, with interest rates already having been cut once this year following the latest Monetary Policy Committee meeting in December. Some experts think that there could be two or three interest rate cuts next year, and that the base rate could be cut to 4% by the end of next year.

Tom Smith
2nd January 2007