UK house prices fall 0.1% in February

House prices fell by 0.1% in February, according to the latest figures from the UK’s largest building society, as a slowdown in activity continued to draw the heat from the market.

But separate figures from the Bank of England showed mortgage approvals rose for the second consecutive month in January, prompting some experts to predict house prices will start rising again soon.

The Nationwide report showed the annual rate of price inflation fell for the sixth month running to stand at 5.7% – less than half the 11.8% rate in June 2014 and its lowest level for 16 months.

The average price of a UK home has fallen back to £187,964, from the recent peak of £189,306 in August.

Nationwide’s figures, which are based on home loans it has approved during the month and adjusted to reflect the makeup of a typical house, are the first to show prices for February.

They are in line with other indicators, which have shown falling interest from buyers and a change of mood from a year ago when prices in London and south-east England were spiralling upwards.

The most recent report from the Royal Institution of Chartered Surveyors showed that just 2% of its members were expecting prices to rise over the next three months, the lowest proportion since May 2013.

Robert Gardner, Nationwide’s chief economist, said the broader economic backdrop supported housing market activity. He said: “Mortgage rates remain close to all-time lows and consumer confidence remains buoyant thanks to a further steady improvement in labour market conditions.

“The unemployment rate has continued to decline and earnings growth has picked up, particularly in inflation-adjusted terms, thanks in part to the sharp decline in energy prices.”

Gardner said the pace of activity was “fairly subdued” but he noted a small pickup in the number of mortgages approved, seen by economists as a timely indicator on the direction of prices.

Bank of England figures showed mortgage approvals continued to rise in January to hit a four-month high. There were 60,786 loans approved for home purchase, up from 60,349 in December.

 The latest mortgage approval figures show a pickup in January for loans approved for house purchases but a drop in remortgaging. Photograph: Bank of England

The latest mortgage approval figures show a pickup in January for loans approved for house purchases but a drop in remortgaging. Photograph: Bank of England

Matthew Pointon, property economist at the thinktank Capital Economics said the housing market appeared to be nearing a turning point. Pointon said: “House prices held their ground in February according to the Nationwide. But with mortgage approvals rising for the second consecutive month, and mortgage rates dropping yet again, prices will soon return to a gentle upwards trend.”

Howard Archer, the chief UK economist at IHS Global Insight, has predicted that prices will rise by 5% by the end of the year.

Archer said he expected the market to be supported by low interest rates and the reforms to stamp duty which were announced in December’s autumn statement and have reduced costs for most buyers.

He said: “It is also possible that limited supply of houses will provide support to house prices in some regions over the coming months.”

However, growth was likely to be constrained by high house-price to earnings ratios, stringent mortgage checks and buyers’ awareness that interest rates will rise eventually, he said. “Many people may also be deterred from buying houses because they look pricey in a number of areas after recent sharp rises,” he said.

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