UK house prices fell faster than expected in August but according to mortgage lender Nationwide, further declines are likely to be modest.
Nationwide said seasonally adjusted house prices followed up a 0.5 percent drop in July with a further fall of 0.9 percent in August.
This represented a much larger decline than the 0.2 percent forecast by economists had forecast and the sharpest drop since February.
Since the decline of UK house prices levelled off in February 2009, the falls in July and August were the first two consecutive monthly price drops.
The annual rate of house price growth was also well below forecast at 3.9 percent down from 6.6 percent.
Falling house prices were put down to the increased number of properties available on the market and according to Nationwide, further declines were likely to be “relatively modest”.
This is because low interest rates mean there were few forced sellers of repossessed property.
Prices increased by up to 10 percent in the 12 months to April following a dearth of supply after a 20 percent fall between mid 2007 and early 2009.
“Given that the price rises of the last year had gotten ahead of the recovery in the wider economy”, said Nationwide economist Martin Gahbauer, “the current correction is not an unhealthy development”.
Economists expect broader economic growth to slow sharply after proposed spending cuts from the government and weakness in Britain’s US and European export markets.
A survey of 2,000 households by Markit and YouGov in August revealed almost 23 percent believed their property was now worth less than before, compared with nine percent who believed it had increased in August.
