House prices fall by 1 per cent in a year

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House prices have seen their first annual fall for 12 years, as buyers continue to be stymied by the credit crunch and the "mortgage famine".

The average cost of a home has declined by 1.1 per cent against its value a year ago, according to the Nationwide Building Society, with prices registering their sixth successive monthly fall. Property prices have now fallen by 4.3 per cent since November.

At £178,555, the average UK home is worth £1,750 less than 12 months ago. The Nationwide figures are in line with other recent data on the state of the housing market. The most recent Halifax index of prices revealed a 2.5 per cent slump during March alone. David Blanchflower, a member of the Bank of England's Monetary Policy Committee, said on Tuesday it was "not implausible" that house prices would fall by a third over the next two years. This week the Bank of England said the number of mortgages approved for house purchase had fallen to a record low during March.

The credit crunch is the fundamental factor pushing the market lower, as banks and building societies withdraw mortgage products and demand higher deposits from first time buyers.

Cuts in interest rates by the Bank of England have not been passed on to home buyers because the money markets are still frozen, with banks unwilling to lend for fear of increasing their already huge losses.