House prices grind to halt, says Nationwide

The housing market ground to a halt in April recording its first month of zero price growth since the immediate aftermath of the 11 September terrorist attacks, Nationwide building society said yesterday.

The fall was driven by a sharp slump in the number of first-time buyers trying to get a foot on the increasingly vertiginous property ladder, it said.

The survey is the latest to point towards a slowing housing market and will revive calls for a cut in interest rates when the Bank of England meets next week.

Nationwide said the annual rate of inflation slowed to 22.2 per cent this month, the weakest figure since September 2002 and well down from March's 26.2 per cent. Alex Bannister, Nationwide's chief economist, said: "The market is clearly less frenetic than April last year [but] there is no evidence of a damaging correction at this stage."

He said he expected prices to rise by between 0.5 and 1 per cent a month, which would reduce the annual rate by the end of the year to its 10 per cent target. The stagnation in prices was accompanied by a slowing in activity with the number of sales in March down by 8,000, or 6 per cent, from the December figure. The number of first-time buyers was on track to hit its lowest level for a generation, Nationwide said. There were 27,000 entrants into the market in the first three months of the year – a 25 per cent fall on the previous quarter.

"If this trend persists for the rest of the year it will take the number of first-time buyers to 400,000 – the lowest level since mortgage markets were deregulated in the early 1980s," Mr Bannister said. He said that unlike the end of the last property crash, there was little hope of first-time buyers flooding back into the market. Mr Bannister added: "A sustained period of lower house sales and house price inflation looks a more likely outcome – even if this appears to be a return to the sort of housing market cycles seen in the Fifties."