UK house prices fell by 0.9% on average last month, according to the latest survey from the Nationwide.

The decline was less severe than the record 2.5% fall seen in May, but prices were now 6.3% lower than a year ago, the Nationwide said.

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The Nationwide survey found that the housing market in Scotland had been more resilient than elsewhere.

Although prices in the three months to June had fallen in Scotland by 1.8% compared with the previous quarter, it was the only area to see an annual growth, up 0.6%.

Nationwide suggested that the sharp rise in oil prices had benefited regions such as Aberdeenshire.

It also pointed to the fact that prices did not shoot up as quickly during the housing boom.

Pace of change

The credit crunch and the resulting difficulty for many to get a good mortgage deal has led to many potential buyers staying put across the rest of the UK.

The sometimes volatile monthly figures showed that the pace of price falls had eased, down 0.9% in June whereas it had dropped 2.5% in May. It was the eighth consecutive monthly fall in prices.

The year-on-year change across the UK was down 6.3% in June compared with 4.4% in May.

The Bank of England this week said that mortgage approvals in the UK has slumped to 42,000 in May, a 28% fall compared with the previous month and 64% down on a year ago.

Nationwide said the lack of activity in the housing market was key to prices, but its analysis suggested it was movers, rather than first-time buyers who were staying put.

It said first-time buyers accounted for a third of transactions in the first three months of 2008, in line with the average over the previous three years.

Movers accounted for fewer than half of transactions in the same period, below the 55% average of the past three years.

The low transaction levels meant the trend with prices would continue, according to Nationwide's chief economist Fionnuala Earley.

"It seems unlikely that there will be any rapid turnaround in housing market fortunes in the coming months," she said.

"However, as prices continue to fall affordability measures become more favourable for those in a well-financed position to buy."

Regional picture

The average home is £13,629 cheaper than at the price peak in October and £11,500 less than at the same time in 2007, but prices are still 4% higher than two years ago and 9% higher than three years ago.

Alongside the monthly survey, the Nationwide has released its quarterly figures on a more local level.

They showed the biggest annual price rises for the second quarter were to be found in the university cities of Cambridge, Canterbury and Oxford, followed by Carlisle and Aberdeen.

Twelve out of 13 areas of the UK witnessed year-on-year drops in house prices during the three months from April.

London - although still the most expensive - has fallen more in line with the rest of the UK owing to tighter controls on lending by banks, a squeeze on household finances and less secure job prospects in the City, according to Nationwide.

Scottish house prices have been "more resilient" but Northern Ireland has shown the biggest correction after sharp rises in 2006-7.

At a local level, the biggest falls in prices, year-on-year for the second quarter were in Sheffield, Belfast, Birmingham, Manchester and Coventry.

Ms Earley predicted that the next move in interest rates would be down, at some point before the end of the year owing to increased pressure on consumer spending and a slowing economy.

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(BBC)

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