November house prices have fallen for the third time in as many months according to Halifax's house price index. Prices fell 1.1 per cent compared with October, although they are actually 6.3 per cent higher year-on-year.
Chief economist, Martin Ellis, said: "The housing market has slowed in recent months as the increase in interest rates between July 2006 and July 2007 has taken effect. Higher mortgage repayments and falling real earnings have put pressure on households' income, resulting in a slowdown in both house price growth and activity."
This is the first time prices have dropped three months in a row since 1995, with prices falling 0.6 per cent in September and 0.5 per cent in October. Halifax attributes the slowdown to the impact of the five interest rate increases that have been introduced since August 2006.
However, Halifax claims the economy has grown for 61 successive quarters. Gross domestic product increased by 0.7 per cent in the third quarter compared with the second, representing the eighth consecutive quarterly increase above the long-term average rate of 0.6 per cent.
This represents the UK's longest running period of unbroken GDP growth on record, which should provide a firm foundation for the housing market, according to the company. Despite this, market activity is lower. Mortgage approvals fell 12 per cent in November to 88,000 and were down 32 per cent compared with November 2006. New buyer interest also fell for the eleventh successive month.
"The UK economy is in sound shape. 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," said Mr Ellis.
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