House prices fell by 0.2 in February according to the latest figures from Nationwide.
The drop follows what had been a very strong start to the year with January seeing a 1.5% increase in house prices.
The average house price in the UK is now £158,578, 3.7% higher than at this time last year, says the lender.
Greg Fuzesi, Nationwide's Senior Economist, says: “As we enter the all-important house buying season in March, the prospects for both house prices and interest rate policy will become clearer. It will also show whether February’s fall is just a pause before the spring rush or the first sign of weak market fundamentals weighing down on prices. We expect the weaker economic factors to begin to dominate over the next 2-3 months and to prevent strong house price rises in 2006.”
Fuzesi also gave warning that the housing market might not see its traditional increase in activity saying many first-time buyers continue to be priced out of the market and uncertainty about the strength of the economy may lead to the delay of some house purchase decisions.
A complicating factor, he said, had been that buy-to-let investors seem to have been behind some of the increase in recent activity in the housing market making forecasts more difficult.
Fuzesi adds: “Affordability among first-time buyers remains stretched and continued uncertainty over the economy’s strength makes strong rises in house prices over the coming months unlikely. While high current levels of mortgage approvals still suggest the existence of some demand pressure in the market, February’s 0.2% fall in house prices is a reminder that fundamental drivers remain weak."
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