House prices in the UK were found to have declined in January 2012, figures by Nationwide Building Society have revealed.
The Nationwide House Price Index has shown that house prices dropped by 0.2% in the last month, down to an average of £162,228.
This is down from the £163,822 average house price in December 2011. But despite the monthly drop, house prices were actually found to be 0.6% higher than the same time last year.
The drop in house prices follows the economic turmoil in the UK in the final three months of 2011, when the economy contracted.
ìGiven the challenging conditions prevailing in late 2011, it’s not surprising that house price growth softened at the start of 2012,î said Robert Gardner, Nationwide’s Chief Economist.
ìThe price of a typical house fell by 0.2% in January, taking the annual rate of house inflation down to 0.6% from 1% in December.î
The drop is good news for potential buyers, but raising the funds for a mortgage deposit is still a big hurdle for the majority of people.
ìThe demand and supply balance may move further in favour of buyers in the months ahead,î added Mr Gardner.
ìThe weakness in buyer demand is partly a reaction to the uncertain outlook for the economy, especially the labour market. But affordability is also part of the explanation ñ in particular, finding a sufficient deposit.î
The deposit for a first time buyer rose considerably in 2008, with the median rising from 10% to as much as 25%, as lenders became more cautious in light of the economic downturn.
This trend has started to reverse since 2010, with median deposits dropping down to 20% as economic conditions improved.
ìThe decline in long-term interest rates has helped to provide some relief for borrowers,î Mr Gardner added.
ìIndeed, interest rates for new lending are currently at a record low, which has helped to improve initial mortgage affordability.î
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