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The sharp fall in house prices has slowed this month, Nationwide said yesterday, but experts predict that they still have further to fall. Britain's biggest building society said that prices dropped 0.4% this month and 13.9% over the past 12 months. This was better than expected - analysts had forecast a monthly drop of 1.6% and an annual fall of 14.9%.
However, economists believe that prices have not yet bottomed out. "With the economy set for a deep recession ...we expect the sharper downward trend in house prices of recent months to reassert itself," said Seema Shah, property economist at consultants Capital Economics.
Further cuts to interest rates are unlikely to boost the housing market as not all banks are passing them on in full. The British Bankers' Association said this week that lending plunged 52% in the year to October as the lack of mortgages available on the market was deterring would-be buyers from making a purchase.
The Bank of England's monetary policy committee slashed 1.5 percentage points off rates this month to leave them standing at 3%, and analysts are forecasting that it will cut at least another half point when it meets next week.
The situation was high on the agenda when Gordon Brown, the prime minister, and housing minister Margaret Beckett met leading figures from the housebuilding industry to discuss ways in which to revive the flagging sector.
Steve Turner, of the Home Builders Federation, said it was vital to restore mortgage lending in order to aid recovery in the housing market. "For this reason we believe it is imperative that the government acts on [Sir James] Crosby's recommendations immediately and does not wait until next spring," he said, referring to Crosby's plan that the government should provide £100bn of guarantees to the mortgage-backed securities that were used to fuel home loans before the credit crunch. Turner added that Brown also restated the commitment that Alistair Darling, the chancellor, made when announcing the banks' refinancing package in September that he would use government influence on the banks to restore some sensible levels of lending.
However, the consensus of the meeting, which was also attended by the Council of Mortgage Lenders, Construction Skills and HBOS, was that not much can be done until banks start lending again.
Meanwhile, the National Fraud Strategic Authority said that mortgage fraud is booming as the downturn persists.
John Cassey at Protiviti, a risk consulting company, said: "Over the last six months we have seen a marked increase in the number of fraudulent mortgages ... Developers, solicitors and property agents have colluded to overvalue new build properties in order to secure higher mortgage advances. The developer is then paid off on the lower value and the criminals vanish with the balance."
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