House prices fall for 12th month in a row

Nationwide today said the average cost of a home was now 14.6 per cent lower than it was a year ago. It was the biggest drop since records began during the recession of 1991 and meant the typical cost of a house is now £158,872 -- almost £30,000 less than the £186,044 average price in October last year.

Prices have fallen 1.4 per cent or nearly £3,000 in the last month alone - the 12th monthly fall in a row.

According to the Bank of England, one in 10 mortgage holders may soon be in negative equity. Asking prices are now far higher than what buyers are prepared to pay and the gap between what a seller wants and gets is widening. The Nationwide survey showed asking prices fell only marginally in the last three months while selling prices were down nearly six per cent.

"One possible explanation for this is that it is only those sellers willing to negotiate on price that are seeing sales go through," said Fionnuala Earley, Nationwide's chief economist. "While others refuse to cut their price, the levels of activity are constrained.

"Consumers still expect prices to continue to fall into 2009 and will therefore be reluctant to trade without some discount on the asking price."

Nationwide said homes were now taking 12 weeks to sell compared with 7.4 weeks a year ago. Estate agents in London are selling just one or two homes a week. Nationwide said the price falls were being driven by the fall in sales, now at their lowest for 34 years.

The record drop in house prices both in Britain and overseas has been a key driver of the crisis that has rocked the banking sector. The dismal state of the economy has raised expectations that the Bank of England will follow up this month's emergency interest rate cut from five per cent to 4.5% with another aggressive move next week.