UK house prices fell for the second consecutive month in August, by 0.9%, the first time prices have dropped for two months in a row since February 2009, according to Nationwide Building Society.
Annual house price inflation, comparing the current average price of all properties with 12 months ago, is now at 3.9%, down from the rates of 6.6% in July and 8.7% in June.
Of course, as we have said before, there is no single property market in the UK, and price inflation varies markedly between sectors, regions and even roads. However, even in London, the annual rate of property price rises has fallen from 21% in April to 16% in August, according to estate agent Knight Frank.
The cost of luxury property in central London fell by 0.1% in August, a decline which followed the 0.5% fall in July. After strong growth in the market since March, such a flattening of prices was generally expected, as the supply of property for sale has been rising and the number of active buyers falling over the summer period.
As buyers return from their holidays, demand is likely to increase once more, especially since the London economy is outperforming the UK average, with vacancies in the City and Canary Wharf markets up significantly year on year, and Credit Suisse paying a one-off bonus to 400 top executives.

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The rate debate – 8% by 2012?
September 7th, 2010The Policy Exchange think tank hit the headlines over August with its prediction of an 8% Bank rate by 2012, necessary to control runaway inflation. If that proves correct, then borrowers on a £500,000 interest-only tracker mortgage would be facing a significant rise in monthly repayments of £3,125.
Most industry experts have poured cold water on the forecast, with the consensus that Bank rate is more likely to return to its long term ‘normal’ level of around 5% in the next few years, with little movement in the immediate future. However, that would still result in the monthly repayments on a £500,000 interest-only tracker mortgage rising by £1,875.
Around 4.5 million borrowers would face an immediate increase in their rates if Bank rate rises, so they do need to consider how they will cope when that happens.
Swap rates – which measure the cost to the banks of funding mortgages over two, three and five years – have fallen recently; five year swaps were at 2.06% at the close of business last week, down from 2.49% a year ago. And as the cost falls, an increasing number of borrowers are choosing the long term security of fixed-rate deals over cheaper variable rates.
About 50% of the new mortgages approved in August were fixed rates, the highest level so far this year, according to the Council of Mortgage Lenders.
Of course, with the help of specialist brokers like Largemortgageloans.com, clients can choose to hedge their bets with a combination of fixed and variable rates.
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