House prices fall £1,600 in a month as number of home loans is halved

Further signs of weakness in property market emerged today after Government data showed house prices fell by 0.7 per cent between May and June.

Other figures also out today revealed that the number of home loans has dipped by half since last year as the credit crunch continues to leave would-be buyers unable to raise funds.

The month-on-month fall in house prices compared to a rise of 1.6 per cent between May and June last year.

Today’s figures from the Department for Communities and Local Government (CLG) showed the annual rate of growth slowed to 0.6 per cent in June, down sharply from the 3 per cent seen in the year to May.

The CLG house price index data contrasts with recent hefty falls in the annual rate of growth indicated by lending giants Halifax and Nationwide as the CLG’s index is calculated at the time when transactions are completed.

But the figures highlight the marked slowdown being seen in the housing market, with a decline in the rate of growth in all countries in the UK.

In England, the annual growth rate fell from 3.1 per cent in May to 0.5 per cent in June, while the rate in Scotland declined from 5.9 per cent in May to 5.7 per cent in June.

Prices fell year-on-year in Wales and Northern Ireland, by 1 per cent and 9.4 per cent respectively, according to the CLG.

The average house price in the UK now stands at £215,029, down from £216,625 in May - a fall of £1,596.

The CLG said the average price paid by first time buyers was £159,606 in June, while the typical price paid by former owner occupiers was £247,917.

Howard Archer, chief economist at Global Insight, said: ‘It seems odds-on that house prices will continue to head rapidly south.

‘Elevated affordability pressures on potential house buyers stem from high house prices, modest disposable income growth and the squeeze on purchasing power coming from soaring utility bills and high food prices, while very tight credit conditions have led to markedly fewer and more expensive mortgages being available.’

A CLG spokesman added: ‘The current issue affecting the market is largely about the supply of credit - a very different situation to the early 90s which was about high interest rates and unemployment,’ he said.

‘The long-term demand for housing remains high and the fundamentals of the economy are sound with low unemployment and historically low interest rates.’

Meanwhile, the Council of Mortgage Lenders revealed the number of home loans granted in the UK slumped by more than half year-on-year in June.

The CML figures show that 47,200 loans were granted in June, down from 97,800 in June 2007 and down from the 51,800 seen in May this year.

The CML also showed that mortgage providers are forcing borrowers to stump up higher deposits as they tighten their lending criteria.

The average homebuyer deposit rose to 22 per cent last month, up from 20 per cent in May and 20 per cent in June 2007, said the CML.

The Royal Institution of Chartered Surveyors (RICS) said today there were indications of marginally better conditions last month despite estate agents selling an average of just 14.4 properties each during the three months to July, the lowest number of property sales since records began in 1978.

RICS said sellers appeared to have ‘more realistic’ expectations and there were more buyer inquiries for the third month running, and fewer agents reporting price falls.

But these improvements were in danger from continued speculation over whether ministers might temporarily suspend stamp duty in a bid to revive the housing market, the institution said.

Today David Cameron accused ministers of being ‘reckless’ with the housing market today over their failure to set out clear proposals on issue.

The Conservative leader used his monthly press conference to urge the Government to adopt his party’s proposals to ease the effect of the credit crunch.

He told reporters: ‘We said back in October that we would abolish stamp duty for nine out of 10 first time buyers.

‘This was a fully costed tax cut last October so I do not know why the Government is still dithering and not getting on with it.’

He went on: ‘When it comes to the crisis in our housing market they seem intent on making things worse rather than better.

‘Their decision to brief out the possibility of a stamp duty holiday was completely reckless.

‘Far from bringing up the housing market they”ve actually frozen it and this tells you everything you need to know about the Government: press handling and headlines above what is in the best interests of the country.’