Your house is worth less than last year

Nationwide has added to the general house price despair by reporting the first year-on-year fall since 1996...

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Last Updated: 31 Aug 2010

According to Nationwide, house prices fell by another 1.1% in April, the sixth monthly decline in a row. This means the average house price has now dropped to £178,555, about 1% lower than it was this time last year. And if this news seems shocking, it’s no wonder – it’s the first time in 12 years that prices have actually fallen year-on-year (compare that to last April, when prices were up 10% on 2006). Nationwide chief economist Fionnuala Earley said April had been ‘another difficult month for the housing market’, suggesting that this latest fall ‘reflects the weakening sentiment in the market brought about by poor affordability and tighter financial market conditions’.

It’s not exactly been a cheery week for homeowners. Yesterday the Bank of England said that the number of new mortgage approvals in March dropped to the lowest level since the Bank’s records began (admittedly this was only in 1999, but it sounds more dramatic the first way). With mortgages getting more expensive and lenders tightening their criteria, just 64,000 hardy souls braved the turmoil to tie up a new deal, down from 72,000 in the previous month.

And just in case we weren’t sufficiently miserable about this, Monetary Policy Committee member David Blanchflower warned last night that our house prices could fall by a third, sending Britain spiralling into a recession. Then again, Blanchflower is known as an arch-dove (i.e. he normally favours aggressive rate-cutting), so it’s not totally surprising that he’s being the voice of doom. But times must be bad - even Tesco's getting out of the market (it's apparently selling its property website to estate agent Spicerhaart, according to the BBC).

We’re getting used to seeing mortgage lenders try to outdo each other with gloomy prognostications on the housing market. But perhaps the most alarming news of this week was that Nationwide is actually putting its money where its mouth is (or not, as the case may be) – it announced on Monday that it won’t lend more than £500,000 to new borrowers, and is demanding a deposit of at least 10%.

On the other hand, there are some signs of life. Following HSBC’s promise to match existing mortgage deals, RBS and NatWest have announced plans to cut rates on their two- and five-year mortgages – suggesting that the Bank of England’s £50bn ‘Special Liquidity Scheme’ might finally be having some effect. Earley reckons we shouldn’t expect the market to return to its previous rude health any time soon, but does seem to think the Bank bail-out will ‘ultimately bring about a more stable market’. Not exactly a bundle of optimism, but it’s probably the best we’re going to get at the moment...

As a nation, we were already obsessed with house prices. Now that the subject's never off the front pages, dinner party conversations will consist of very little else. Can't we go back to talking about the weather again? At least we're used to being disappointed on that score...

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