House prices fall for fifth month

The average value of a home inched ahead by just 1.1% in the year to the end of March, its lowest rate since March 1996, according to Nationwide Building Society.

Prices have fallen by 0.6% during the past month to leave the average property costing £179,110, 2.9% less than when prices began their downward trend in November and just £2,027 more than in March last year.

The group warned that there had been a "clear change in sentiment" since the summer, and this was contributing to the "sharp slowing" in house price growth.

Fionnuala Earley, Nationwide's chief economist, said: "The outlook for UK house prices is clearly more downbeat than at the time of our November forecast.

"Some of the downside risks we identified then have become a reality - most notably the continued turmoil in the financial markets."

The group now expects house prices to end the year up to 4% lower than they started it, although it added that a "modest fall" would ensure greater stability in the market going forward.

House prices are coming under pressure from a combination of stretched affordability and the credit crunch, which has led to lenders tightening their lending criteria and raising their rates.

The trend is hitting first-time buyers particularly hard, as they are being forced to raise larger deposits, with very few 100% mortgages still remaining.

The British Bankers' Association said the number of mortgages approved during February for people buying a house had fallen by a third compared with the same month of 2007 as people put off moving or struggle to raise the mortgages they need.