House prices drop flags another interest-rate standstill

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Building society Nationwide's latest index showed average prices falling a surprise 0.2% to £165,609 in April, fuelling expectations of a virtually stagnant property market this year.

The latest construction snapshot from the Chartered Institute of Purchasing and Supply also showed a sharp slide in growth. The index, where a score over 50 shows growth, slowed sharply from 56.4 to 53.3, with housebuilding posting its first decline for a year. Its survey has shown more signs of life in the sector than the 4.7% first-quarter slide in official figures, widely questioned by the industry, but the sector remains under threat from spending cuts.

Chief executive David Noble said: "Low activity levels in the housing market, tighter government purse strings, rising input prices in fuel and materials, as well as poor cash flow in some cases, are clearly a worry." The Bank's monetary policy committee is expected to hold interest rates tomorrow.

Lending figures also gave little cheer despite a slight rise in mortgage approvals to 47,557
in March.