House prices across the UK have fallen by an average of 3.2 per cent and by as much as 6.8 per cent in London, according Rightmove.co.uk's monthly House Price Index; which claims the fall has been "exacerbated by seasonal factors and HIP-avoiding first-time sellers".
The leading UK property website found that asking prices have fallen by £7,590, and estimates the 'HIP effect' has contributed 1.1 per cent to the monthly drop nationwide, and up to 2.3 per cent in London.
"An artificially induced increase in supply at the slowest time of the year in the property market, followed by HIP costs deterring new sellers in the New Year, is a hindrance to market recovery," says the report. "A period of stagnation remains the most likely outcome for 2008."
Trevor Kent, former President of the National Association of Estate Agents, says he is not surprised by the figures, having predicted all along the negative affect HIPs would have on the housing market.
"Quite how Gordon Brown could contemplate stoking the fire of further price reductions in the housing market by proceeding with the final run out of HIPs, is beyond me," he said.
"One would have thought he would do everything he could to bolster prices, especially as he won't want to see Northern Rock's mortgage book fall further in to negative equity, surely."
But it is not just HIPs that are to blame, the sub prime crisis in the US and the "increased dependence on mortgage funding raised from the log-jammed wholesale money markets rather than from savings deposits" has also had a huge affect, says Rightmove.co.uk.
“Traditionally, the Bank of England base rate is the most important factor in setting mortgage rates," explains Miles Shipside, Commercial Director of Rightmove.co.uk.
"In recent months, however, problems in the mortgage funding markets mean that the biggest influence has been the interest rate at which banks are prepared to lend to each other rather than that set by the Bank of England,"
"One way or another, we need a further 0.5 per cent cut in the cost of credit to borrowers early in 2008 just to return market borrowing rates to where they were before the credit crisis," he said.
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