Nationwide sees housing market gently slowing

House prices rose by 0.9% last month but the annual rate of house price inflation fell to a four-year low of 7%, the Nationwide said yesterday.

The monthly rise followed a 0.6% fall the month before and essentially meant the housing market remained static as it has been since last autumn, the lender said.

The Nationwide figures conflict with other surveys from estate agents and surveyors which suggest prices have been falling for months.

"Volatility in monthly house price changes is not unusual in spring," said Nationwide's chief economist, Fionnuala Earley. "Given the early Easter we believe the traditional house hunting season may have moved forward slightly this year. The trend, however, continues to confirm our view of a gentle slowing in the market."

The Bank of England's five interest rate rises between November 2003 and last August have halted the growth in the housing market, which had seen prices triple over the previous seven years.

Economists are divided between those who think prices will remain static and those who think they could fall by up to 20%. Various house price surveys paint a picture of steady prices but low sales volumes as sellers are currently reluctant to lower their prices.

Ed Stansfield of Capital Economics, one of the leading pessimists on house prices, said he suspected that the Nationwide rise in March was being exaggerated by the low level of turnover in the market. "We still believe that lower prices are the likely outcome."

Ms Earley said there was a north-south divide in house prices with areas in the north still quite strong in contrast to London and the south-east, where prices were weak.

The Nationwide is still forecasting that prices will finish the year on average about 2% higher than they began it.

Howard Archer, analyst at Global Insight, was less sure. "While the latest data and survey evidence relating to housing market activity show overall signs of stabilization at - and in some cases modest improvement from - a relatively low level, it currently remains very much a buyers' market. Consequently, we expect house prices to show further softness in the near term at least."

Recent figures on mortgage approvals have levelled out after falling sharply for months. They are nevertheless 30% lower than a year ago and Nationwide said it had seen an increase in the stocks of unsold properties.

After the house price data was released, sterling rose to a seven-month high against the euro of 67.6p.