ANNUAL house-price growth across the UK fell to its lowest level for 12 years in March, as prices dropped for the fifth successive month.
The average value of a home inched ahead by just 1.1 per cent in the year to the end of the month, its lowest rate since March 1996, according to Nationwide Building Society.
Prices have fallen by 0.6 per cent during the past month. The average pr
operty costs £179,110 – 2.9 per cent less than when prices began their downward trend in November and just £2,027 more than in March last year.
The group warned of a "clear change in sentiment" since the summer and said 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 expects house prices to end the year up to 4 per cent lower than they started it. It said a "modest fall" would ensure greater stability in the market.
House prices are coming under pressure from a combination of stretched affordability and the credit crunch, which has led to lenders tightening lending criteria and raising their rates.
The trend is hitting first-time buyers particularly hard, as they are forced to raise larger deposits, with very few 100 per cent mortgages available.
The British Bankers' Association yesterday said the number of mortgages approved in February had fallen by a third compared with February 2007 as people put off moving or struggled to raise the mortgages they need.
Nationwide, the UK's second-biggest mortgage lender, yesterday raised its mortgage rates by 0.2 per cent for fixed-rate deals and by between 0.5 per cent and 0.57 per cent for trackers.
It blamed the move on "significant increases" in the cost of funding, adding that it had seen "huge inflows of business" as competitors raised rates.
Norwich & Peterborough Building Society, which has regularly featured in the mortgage best-buy tables, raised fixed rates by 0.2 to 0.25 per cent and its variable ones by up to 0.5 per cent.
The constant increases in mortgage rates have wiped out the interest-rate cuts made by the Bank of England in December and February, increasing pressure on the monetary policy committee to reduce rates again. Economists expect the rate cut predicted by Bank of England governor Mervyn King to come next month or May, despite concerns about higher inflation.
Howard Archer, the chief UK and European economist at Global Insight, said: "The current escalation of the credit crunch means there is an increased risk that a significantly sharper housing-market correction could occur."
He said this could be triggered if buyers and sellers started to expect prices to fall sharply, prompting sellers to put their homes on the market to cash in on previous gains, while buyers delayed making a purchase. Global Insight expects house prices to fall 5 per cent both this year and next.
Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors, said: "Lenders are continuing to respond to the worsening conditions in the money markets by raising the cost of mortgage loans and tightening up on lending criteria.
"There is little reason to believe that underlying problems facing mortgage lenders will ease any time soon. As a result, house prices are likely to continue to drift lower in the coming months."
EAST DUNBARTONSHIRE IN Top 15 of UK best places to liveEAST DUNBARTONSHIRE is the best place to live in Scotland, according to the first annual quality-of-life survey carried out by the Halifax.
The region, which includes the Glasgow suburb of Bearsden, was placed 15th on a list of the top 50 places to live in Britain in the report, which calculates a quality of life index based on health, education, housing quality, crime, traffic, weather and carbon emissions.
East Lothian, East Renfrewshire, Moray, Midlothian and the Scottish Borders were also included on the list of places with the best quality of life in Britain.
A spokesman for the building society said high employment, a high level of owner occupiers, good health and good educational results had all helped East Dunbartonshire to its place. Buckinghamshire in the Home Counties was the highest ranked in the UK because of the good health enjoyed by people who live there.
The full article contains 768 words and appears in The Scotsman newspaper.
