UK house prices fell in the past 12 months. It is the first time house prices have fallen year on year since 1996. House prices peaked in July of 2007 and their pace of decline has accelerated in the past couple of months.

The main factors currently dragging house prices down include:

Fall in mortgage finance. The number of mortgage products on offer have declined sharply over the past 12 months. The lack of mortgage finance has led to a sharp fall in demand, especially amongst first time buyers who are struggling to raise a sufficient deposit.

Furthermore, the Bank of England’s intervention doesn’t seem to have solved the shortage of mortgage finance. Banks such as Nationwide are still announcing less mortgage products on offer.

Increased Mortgage costs for those having to remortgage. People who took out fixed rate mortgage deals a couple of years ago were able to benefit from rates as low as 3.5%. Those people who are remortgaging are seeing a sharp rise in the cost of mortgage finance.

Affordability issues. Combined with the difficult of getting finance is the long term decline in housing affordability. The ratio of house prices has increased faster than incomes. This has made it difficult for people to get on property ladder.

How Much will house prices fall.

One member of the MPC has stated that house prices could fall by upto 33% in the next 2-3 years.