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House prices suffer 1st annual fall in 12 years

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Date: Wednesday 30 Apr 2008

LONDON (ShareCast) - House prices fell on an annual basis for the first time in 12 years in April as prospective buyers found it increasingly difficult to finance property purchases.

The average price of a home dropped 1% to £178,555 on the same time last year, something that hasn’t happened since March 1996, said Nationwide, the UK’s largest building society.

April saw a 1.1% decline in prices, according to Britain's fourth-biggest mortgage lender, twice the figure analysts were looking for. Values, which have now fallen for the last six months, sank 0.7% in March.

“We've been expecting some moderate fall in house prices this year, and that's only to be expected since we're seeing deteriorating affordability and tighter credit market conditions,'' Nationwide chief economist Fionnuala Earley told Bloomberg TV.

She estimates that 400,000 borrowers coming to the end of tracker or discount deals over the whole of 2008 may face a fairly significant payment shock.

Yesterday, a report from the Bank of England revealed mortgage approvals tumbled to their lowest since records began, dropping to just 64,000 in March from a downwardly revised 72,000 the previous month.

Elsewhere Tuesday, the Building Societies Association (BSA) reported a drop in gross lending to £3.63bn in March from £3.86bn in February and £5.44bn a year ago.

A day earlier, estate agent Savills warned that house prices could plunge by a quarter by the end of next year if the credit crunch continues to batter consumer confidence.

Its worst case scenario would see prices slump 10% in 2008 and another 15% in 2009. It reckons the probability of a flat market in 2008 is zero.