House Prices Fall in June 2009

House prices dropped in June as rising rates for mortgages made it difficult for first-time buyers to secure home loans. Prices dropped by 0.4 per cent in June, figures from Rightmove now show.

The shortage of property for sale has kept prices increasing in recent months, but as mortgage lenders both increase their rates and continue to demand large deposits, sellers are being forced to price their homes competitively to generate interest.

Increases from many lenders on the fixed-rate deals in recent weeks are hampering the market, despite the base rate staying at 0.5 per cent. This increase in fixed rates mirrors what the large lenders believe will happen with rates in the medium term; many commentators believe that to stop any huge inflation pressures in the long term, the BoE will have to raise rates at the end of 2009.

Many believe that the increase in the cost of home loans will undermine the stabilisation of the housing market. Prices rose by 2.6 per cent in May, the biggest rise in one month for six years.

House prices have collapsed by 22 per cent since the market peaked in the autumn of 2007.