This deal would deliver the biggest shake-up in high street banking in a generation
Property prices dipped by 0.7% in July and are now down 2.6% on a year ago, the sharpest annual decline since August 2009, according to Nationwide. The average home is now worth £164,389 compared to £163,822 in December 2011.
Property prices have dropped 13% below their 2007 peak on the Nationwide index and have returned to the same levels as May 2006. However, although this looks to be gloomy news, when compared with the performance of the UK economy as a whole, house prices are showing resilience.
Economists at Nationwide say the UK economy has contracted by 1.4% over the past nine months, and is now 4.5 percentage points smaller than it was in the first quarter of 2008. While UK prices are 13% below their 2007 peak, this is less than the declines seen in other countries.
House prices in Netherlands, USA and Spain have all fallen further than the UK, with Dutch house prices down 15%, US prices down 18% and Spanish prices down 24%.
The disappointing house price data has coincided with an outbreak of cut-rate mortgages from banks and building societies, with the Leeds Building Society offering a two-year fixed rate mortgage at 3% and NatWest, HSBC and Santander offering five-year fixed rate mortgages at rates below 3%.
However, these mortgages are aimed at buyers with at least a 40% deposit and come with fees ranging from £1,500 to £2,500.
Property analysts say this surge in mortgages is down to the launch today of the government’s Funding for Lending Scheme. The scheme aims to boost the availability of credit to households and firms by guaranteeing the availability – and lowering the cost – of the funds that banks and building societies need to do business.
Ashley Alexander, managing director of the estate agent review website MeetMyAgent, said: “The property market seems to be mirroring the economy – there is a far closer correlation between the two than there has been in the past.
“The hope is that the Funding for Lending scheme, and the end of the Olympics, will see a surge in activity in the autumn and inject some much-needed momentum into the housing market.
“Even if there is a greater availability of credit, the question is whether there is the demand for this credit -consumers remain very cautious.