Falling house prices mean cheaper mortgages

House prices across the UK have fallen by the biggest margin in over three years, meaning mortgage loans could get cheaper.

A survey conducted by the Nationwide building society showed that prices in October fell by 0.4 per cent, the biggest drop since February 2001, slashing this year's growth in prices to 15.3 per cent over all, down from 17.8 per cent projected in September.

Alex Bannister, Nationwide's economist, explained: "This has been a period of marked deceleration in house price growth and is in part a result of 'real' factors, such as weak real take-home pay growth, rising interest rates and stretched affordability, acting as a drag on the market."

Nonetheless, he was optimistic about the future of the market: "Developments remain consistent with our view that over the coming years, house prices are more likely to grow at a very subdued rate rather than fall sharply."

The average cost of a house in the UK fell to £152,159, down from £153,727 the previous month, but still at a relative high mark.

Nationwide noted that although it was cutting its growth forecast, with figures at the end of the year likely to show an annual rate of 12 per cent, it will still be three per cent-points higher than their own predictions in December 2003.