The Nationwide has changed its prediction for property values after UK house price inflation fell to its lowest rate for 12 years.
The Nationwide has changed its prediction for property values after UK house price inflation fell to its lowest rate for 12 years.
The mortgage lender said prices fell by 0.6% in March, cutting the annual rate of increase to 1.1% - its lowest rate since March 1996.
The mortgage lender said prices fell by 0.6% in March, cutting the annual rate of increase to 1.1% - its lowest rate since March 1996.
After five months of price falls, it said prices would continue to drop.
After five months of price falls, it said prices would continue to drop.
This marked a shift from its previous prediction that there would be no overall change by the end of this year.
This marked a shift from its previous prediction that there would be no overall change by the end of this year.
The Nationwide survey said the average UK house price had fallen slightly to £179,110.
The Nationwide survey said the average UK house price had fallen slightly to £179,110.
The three-month on three-month price change - which is considered a better indication of the underlying strength of the market - showed a fall of 1.5%
The three-month on three-month price change - which is considered a better indication of the underlying strength of the market - showed a fall of 1.5%
'More downbeat'
'More downbeat'
Nationwide chief economist Fionnuala Earley admitted that the building society had reassessed its forecast of no change in prices by the end of the year, now predicting a fall in prices.
Nationwide chief economist Fionnuala Earley admitted that the building society had reassessed its forecast of no change in prices by the end of the year, now predicting a fall in prices.
"The outlook for UK house prices is clearly more downbeat than at the time of our November forecast," she said.
"The outlook for UK house prices is clearly more downbeat than at the time of our November forecast," she said.
"A moderate fall in prices at this stage should not be unwelcome and should help to ensure greater stability in the market going forward."
"A moderate fall in prices at this stage should not be unwelcome and should help to ensure greater stability in the market going forward."
Despite the slowdown, prices are still 11% higher than two years ago and 47% higher than five years ago, the Nationwide said.
Despite the slowdown, prices are still 11% higher than two years ago and 47% higher than five years ago, the Nationwide said.
"A clear change in sentiment since the late summer has led to the sharp slowing in house price growth, prices are now 1.5% lower than three months ago," said Ms Earley.
"A clear change in sentiment since the late summer has led to the sharp slowing in house price growth, prices are now 1.5% lower than three months ago," said Ms Earley.
"Expectations of higher house prices will have undoubtedly encouraged some speculative demand in the housing market over the years.
"Expectations of higher house prices will have undoubtedly encouraged some speculative demand in the housing market over the years.
"But with lower house price growth expected now and in the future, the effect will work the other way, causing at least some of this demand to fall away," she added.
"But with lower house price growth expected now and in the future, the effect will work the other way, causing at least some of this demand to fall away," she added.
Higher interest rates
Higher interest rates
On Thursday, the building society announced that it was raising its interest rates on all its fixed-rate and tracker deals.
On Thursday, the building society announced that it was raising its interest rates on all its fixed-rate and tracker deals.
The MPC will bring forward its rate cut to April Fionnuala Earley, Nationwide chief economist
The MPC will bring forward its rate cut to April Fionnuala Earley, Nationwide chief economist
These types of loans currently account for 90% of all new mortgages being taken out by UK homebuyers.
These types of loans currently account for 90% of all new mortgages being taken out by UK homebuyers.
The society said it was putting up the cost of its loans because it was having to pay more to borrow the money from other lenders in the financial markets.
The society said it was putting up the cost of its loans because it was having to pay more to borrow the money from other lenders in the financial markets.
The interest rate at which banks lend to each other, known as Libor, has risen by half a percentage point since the last week of January.
The interest rate at which banks lend to each other, known as Libor, has risen by half a percentage point since the last week of January.
Slowdown
Slowdown
The UK housing market now looks as if it will go through its biggest slowdown since the early 1990s.
The UK housing market now looks as if it will go through its biggest slowdown since the early 1990s.
Alongside a growing expectation among buyers and sellers that prices will fall, many lenders are finding it hard to raise the money necessary to fund their mortgage operations.
Alongside a growing expectation among buyers and sellers that prices will fall, many lenders are finding it hard to raise the money necessary to fund their mortgage operations.
Despite recent cuts in interest rates by the Bank of England, the cost of paying for a new mortgage - and in some cases an existing one - has risen.
Despite recent cuts in interest rates by the Bank of England, the cost of paying for a new mortgage - and in some cases an existing one - has risen.
Most lenders are now demanding larger deposits, while some deals, such as those offered by the Nationwide, are now being charged at a higher interest rate than before.
Most lenders are now demanding larger deposits, while some deals, such as those offered by the Nationwide, are now being charged at a higher interest rate than before.
Ms Earley predicted that the Bank of England would cut interest rates again soon.
Ms Earley predicted that the Bank of England would cut interest rates again soon.
"The collapse of Bear Stearns and the fallout from false rumours of problems in a major UK bank may have helped to shift the focus of the monetary policy committee (MPC) to the need to loosen conditions in the financial markets," she said.
"The collapse of Bear Stearns and the fallout from false rumours of problems in a major UK bank may have helped to shift the focus of the monetary policy committee (MPC) to the need to loosen conditions in the financial markets," she said.
"We think these latest developments, along with the continued weakening in the housing market, will mean that the MPC will bring forward its rate cut to April," she added.
"We think these latest developments, along with the continued weakening in the housing market, will mean that the MPC will bring forward its rate cut to April," she added.
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