Average house price falls £22k in a year

British house prices fell for a sixth month in a row in July to the lowest in two years, Britain's biggest mortgage lender HBOS Plc said today, in a further sign the housing market is cooling sharply.

Prices fell 1.7 per cent on the month, according to the bank's Halifax house price index, slightly greater than analyst forecasts for a 1.5 per cent drop.

Halifax said the average price of house in the UK was £177,351 pounds, down 11 per cent from the peak of £199,600 in August last year.

"Pressure on householders' income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers' ability to enter the market," said Suren Thiru, economist at Halifax.

Prices in the three months to July were 8.8 per cent lower than a year ago, against forecasts for a 8.5 per cent decline.

The monthly fall of 1.7 per cent represented a slowdown from the falls seen in May and June, which were 2.5 per cent and 1.9 per cent respectively. But it is the fourth month running that house prices have dropped more than 1.5 per cent.

Prices have now fallen in nine of the past 11 months, but they are still 34 per cent higher than five years ago and 145 per cent higher than a decade ago.

Today's figures are in line with those reported by Nationwide Building Society last week, which showed that house prices fell for the ninth month in a row during July, dropping by 1.7 per cent.

At the same time annual house price growth fell to minus 8.1 per cent, the lowest level since the index was launched in 1991. All the major house price indexes are now showing falls, with economists predicting prices will drop by up to 12 per cent this year.

The market is also unlikely to receive a boost from the Bank of England's Monetary Policy Committee (MPC) in the short term.

The MPC announces the results of its two-day interest rate setting meeting later today, but it is widely expected to keep the official cost of borrowing on hold at 5 per cent due to inflationary pressures.

Despite the current turmoil, Halifax said the housing market continued to be underpinned by strong fundamentals.

Economist Suren Thiru said pressure on householders' income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, was constraining potential house buyers' ability to enter the market.

But the economist added: "A solid labour market, low interest rates and a shortage of new houses continue to support the market. The labour market is the key driver of the housing market and the number of people in employment is at a record high."