House prices are falling at their fastest annual rate in three years, according to Nationwide. Prices fell by 0.7% month-on-month in July, and by 2.6% year-on-year the biggest annual fall since August 2009. That leaves prices a full 13% below their 2007 peak, ignoring the impact of inflation (which would make the figure even worse). Only London and the southeast bucked the trend.
However, other surveys suggest that even the London property engine room, bolstered by foreign buyers in the last few years, is running out of steam. Rightmove recently reported that asking prices had fallen by 3.6% in the capital in just one month. Add in this week's Bank of England mortgage approval data, which came in at an 18-month low, and further house price falls seem very likely for most of Britain this summer.
House price falls aren't something the government wants to see, of course. The latest attempt to arrest the decline comes in the form of the Funding for Lending Scheme. The government will make another £80bn of cheap funds available to Britain's lenders via the Bank of England and the Treasury, on condition that the money is passed on to households and businesses.
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However, this rather misses afundamental point: banks and building societies don't want to lend to anyone who is not watertight (ie, already has a huge amount of equity or collateral), even if they are offered cheap funds as a financial carrot. Worse, the availability of cheap funds from the government may encourage banks to cut the interest rates they offer savers on their deposits (if they can raise money cheaply elsewhere, they won't be as desperate to raise funds from you and I).
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