British house prices fell for the first time in two years in August and at the fastest pace in nearly four, the Halifax bank said today, in another sign the property market has turned.
The country's largest mortgage lender said house prices fell by 0.6 per cent in August, the sharpest decline since December 2000 and only the 10th monthly fall in the last five years - a period in which prices have more than doubled.
Prices in the three months to August were still up 21.3 per cent on a year earlier, the smallest rise since May, as they were going up by an average of 2.0 per cent in the first five months of the year.
Last month, the Halifax reported prices rising by 1.3 per cent in July and increasing by 22.1 per cent in the three months to July compared with a year earlier.
Mr Martin Ellis, chief economist at the Halifax, said the latest survey provided clear evidence that the five interest rate rises since November are slowing the housing market.
"We continue to expect house price inflation to slow gradually over the remainder of 2004 and into next year as higher interest rates and the increasing difficulties faced by potential first-time buyers in entering the market curb housing demand," he said.
Analysts expect the Bank of England to hold interest rates steady at 4.75 per cent
next Thursday but many see another quarter-point hike in November.
They do not, however, see many more rate hikes beyond that as evidence gathers that the BoE has been successful in its aim of slowing housing prices which the central bank was worried were rising at an unsustainable pace.
Sterling hit a 3-1/2 month low against the euro and slipped against the dollar as the Halifax numbers encouraged dealers to scale back further expectations of British interest rate hikes.
"With consumer spending also showing signs of moderating in July and August, there is a growing possibility that the Bank of England could leave interest rates unchanged through the rest of this year," said Mr Howard Archer, economist at Global Insight.