House prices continue fall but saving for a deposit remains difficult

House prices have declined for the fifth month in a row, falling 0.6% in January, according to one of the UK’s biggest mortgage lenders.

The five month fall makes it the longest period of consecutive falls since February 2009, according to economic research company Pantheon Macroeconomics.

House price data from Nationwide building society showed the monthly price decline was greater than expected as economists had forecast a 0.3% fall.

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Prices are now 3.2% below the high seen in August when the average house cost £273,71.

The cost has come down by roughly £20,000 and last month the average house was £258,297 – a further decrease from £262,068 in December.

The figures come as the Bank of England data showed mortgage approvals continued to drop. The Bank figures showed demand for mortgages fell to the lowest level since the early days of the 2020 COVID-19 lockdown in December.

But house prices are still growing in the year overall, just at a slower pace. Annual house price growth slowed to 1.1%, down from 2.8% in December.

Soon the growth will reverse entirely, a senior pensions and retirement analyst at Hargreaves Lansdown said.

“The heady days of the pandemic race for space feel like a lifetime away and it won’t be long until we see house price growth going backwards,” Helen Morrissey said.

Pantheon Macroeconomics estimate the drop from the peak will reach 8%.

Would-be home owners face an uphill battle, the Nationwide data showed. The cost of living crisis, driven by double digit inflation has made saving for a deposit a difficult task.

The problem is particularly hard for those in the private rental sector, Nationwide’s chief economist said.

“Saving for a deposit is proving a struggle for many given the rising cost of living, especially those in the private rented sector where rents have been rising at their strongest pace on record,” Robert Gardner said.

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“High house prices relative to earnings mean deposit requirements remain a major challenge. Moreover, the help to buy equity loan scheme that helped those with a smaller deposit buy a new build property is due to end in March.”

There remains a gap between the least and most affordable regions, the Nationwide figures illustrated though it has remained stable over the year.

“Affordability pressures remain particularly acute in London and the south of England, where mortgage servicing costs have risen sharply compared with a year ago,” Mr Gardner said.

“Scotland and the North continue to be the most affordable regions but, even there, mortgage payments as a share of take-home pay are at their highest level for over a decade.”