Nationwide reports drop in house prices

House prices fell 0.1 per cent during January, Nationwide Building Society said yesterday, the third month in a row that the property market has declined.

Nationwide said the market was now experiencing its longest period of decline since 2000, with the annual rate of house price inflation down to 4.2 per cent.

The building society's figures are in line with other recent data published by Halifax Bank and the Department for Communities. The Centre for Economics and Business Research has predicted that the average value of a British home will fall by 4.2 per cent, or £11,000 from its peak, with prices suffering their first annual reduction since 1995.

Such a drop would prompt fears of a return of negative equity.

The Financial Services Authority has warned of 1 million mortgage holders at a heightened risk of being unable to keep up with the repayments on their homes. Yesterday, the online estate agents Rightmove said that 7 per cent of home sellers were trying to move because of high mortgage repayments.

Martin Gahbauer, Nationwide's senior economist, said: "Key indicators such as mortgage approvals and the sales-to-stock ratio have now fallen close to or even below the troughs reached in late 2004, a period that was followed by a year of very subdued price growth."

The regular GfK/NOP survey, published yesterday, suggests that consumer confidence hit near 12-year lows in January.