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Last Updated: Wednesday, 5 December 2007, 09:11 GMT
House prices dip 1.1% in November
Man looking in estate agent's window
Higher interest rates have taken their toll in recent months
UK house prices fell in November as higher interest rates and increased mortgage repayment costs took their toll, the Halifax has reported.

According to the lender, house prices fell by 1.1% in November, taking the annual rate of growth down to 6.3%, compared with 8.9% in October.

The Halifax calculates that the average residential property across the UK now costs 194,895.

It added that activity in the housing and mortgage markets was also slowing.

Pressure

The fall is the largest monthly drop since December 2006. It is also the first time since 1995 that the Halifax figures have shown house prices falling for three successive months.

Halifax chief economist Martin Ellis said the increase in interest rates between July 2006 and July 2007 had taken effect.

Halifax and Nationwide house prices

"Higher mortgage repayments and falling real earnings have put pressure on households' income, resulting in a slowdown in both house price growth and activity," he said.

But he said he believed the housing market still had a "very solid foundation".

"Strong market fundamentals, a structural housing supply shortage and pent-up demand from a large number of potential first-time buyers will support house prices, preventing a sustained and significant fall," he added.

Halifax argues the market is further underpinned by the fact that employment levels are at a record high.

Consensus

It supports the latest figures from Nationwide, which showed house prices suffering their biggest fall in 12 years during November.

According to its measure, annual house price inflation now stands at 6.9%.

At the same time, the Bank of England has revealed that the number of mortgage approvals has fallen to a near three-year low.

The Halifax data provides significant late support to the case for the Bank of England to cut interest rates
Howard Archer, chief economist, Global Insight
The Halifax data is just the latest to reveal a slowdown in the property market.

The Bank's latest report showed 88,000 new mortgages for home buyers were approved in October, 12% lower than in September and down 31% from October 2006.

Surveyors have also reported a continuing drop in enquiries from would-be buyers.

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Howard Archer, chief economist at Global Insight, said the Bank of England's interest rate setting committee should pay close attention to the Halifax data when it meets this week.

The Bank's Monetary Policy Committee is already under pressure to cut borrowing costs amid growing signs that nervousness about the economy is hitting consumer spending.

"The third successive, and deeper, fall in the Halifax house price index in November raises concern that the housing market is headed for a sharp correction - particularly as it follows very weak Bank of England mortgage approvals data for October," Mr Archer argued.

"The Halifax data provides significant late support to the case for the Bank of England to cut interest rates by 25 basis points to 5.5% on Thursday."



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