House prices set to 'fall in the short term'

Wednesday, 24 November 2010 12:00

The Nationwide building society has stated that house prices are likely to continue to fall in the short term as concerns about the impact of the government’s spending cuts make potential buyers wait and see what will happen to the market.

House prices have seen a small decline since the summer and the Nationwide building society does not expect the fall in prices to be as dramatic in 2008 because of low interest rates, which will curb mortgage arrears and repossessions. The building society expects the Bank of England to keep interest rates at 0.5 per cent for at least another year.

Nationwide has released its interim results that show a profit of £259 million and that the value of its bad debts were reduced by 44 per cent to £179 million, with only 0.67 per cent of residential mortgages in arrears, less than one third of the industry average.

Gross mortgage lending in October confirmed that demand for new mortgages is low. The total was an estimated £12.4 billion, the same as September, but down nine per cent from October 2009.

Commenting on the figures, The Council of Mortgage Lenders said: “The month-on-month annual comparison is likely to continue to decrease a little in the coming months, because underlying lending volumes rose sharply in the latter part of 2009 as borrowers rushed to take advantage of the stamp duty concession before the end of the year. The market remains subdued.”

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