According to a recent report house price growth in the UK has slumped to an eight year low, and this has resulted in additional pressure being put on the Bank of England to cur interest rates further as soon as possible. The Bank of England has already indicated that it will cut the base rate again in April, rather than in May as had been expected by industry experts, stating that this earlier rate cut was more likely due to the tighter credit conditions now in place in the UK.
Figures from the Nationwide Building Society show that house prices at present are only 1.1% higher than they were one year ago, and this reflects the smallest increase since 1996, well over a decade ago. This also reflected a significant fall from last month's figure, which was 2.7%. However, between February and March house prices fell by 0.6%, bring the average UK property price down to £179,110, although the average price in London is significantly higher than this.
The Bank of England hiked up interest rates five times between August 2006 and July 2007, but dropped the rate for the first time in over two years in December 2007. There was a further 0.25% rate cut in February, which brought the interest loan rate down to 5.25%, and it is likely that the Bank of England will now cut the rate by a further 0.25% in April.
One Nationwide official said that the Bank of England needed to act quickly in order to try and stabilise the housing market and ease credit conditions. She said: 'Since the last meeting, the collapse of Bear Stearns and the fallout from false rumours of problems in a major UK bank may have helped to shift the focus of the monetary policy committee to the need to loosen conditions in the financial markets and bring more life to mortgages.' She added: 'We think these latest developments, along with the continued weakening in the housing market, will mean the MPC will bring forward its rate cut to April.'