Another month. This time, evidence seems to be growing that house prices may be falling.

Mortgages:

100,230 mortgages were approved in May, which was 1 per cent down on the month before. The total value of mortgages in the month was worth £11.4bn, 3 per cent up on April. Mortgages approved for house purchases stood at 49.8 thousand, similar to the level seen in the previous month but down on the average over the six-month period to January which was 51,865. Approvals in May were 15 per cent below the November mini peak, and 50 per cent below the 2006 high. Paul Diggle, Property Economist at Capital Economics said: “Whilst lenders remain credit constrained, offering enticing deals to capture new business is difficult, meaning that for now we cannot see a quick end to subdued activity.”

For more see Bank of England release

 What the ‘big three’ surveys say

According to the Nationwide, house prices still rose in June, but by just 0.1 per cent. This followed a rise of 0.5 per cent in May and a 1.1 per cent rise the month before. According to the building society, the annual rate of house price inflation to June was a healthy 8.7 per cent, but over the last six months prices rose by 3 per cent. Martin Gahbauer, Nationwide’s Chief Economist, said: “Looking beyond the short-term, the spending cuts and tax increases in the Budget will clearly put a squeeze on household disposable incomes, which are undoubtedly an important driver of house prices. Given the already elevated level of the house price to earnings ratio, this limits the scope for property values to maintain the very strong upward momentum that we have seen over the last year. However, the acceleration of the fiscal consolidation means that interest rates are likely to be lower than they otherwise would have been, which should provide some offsetting support to households and mortgage affordability.”

According to the Halifax survey, house prices fell by 0.6 per cent in June. It was the third month in a row which saw house prices fall on a monthly basis. The Halifax index now indicates that house prices are 6.3 per cent up on a year ago. Martin Ellis, housing economist at Lloyds (which owns the Halifax) said: “A shortage of properties for sale in 2009 contributed to an imbalance between supply and demand and was a key factor driving up house prices last year. An increase in the number of properties available for sale in recent months has helped to reduce the imbalance, relieving the upward pressure on prices. The low level of interest rates, however, continues to support housing demand.”

According to Hometrack, house prices rose by 0.1 per cent in June, after seeing rises of 0.2 per cent in each of the two previous months. Hometrack has annual house price inflation running at 2.1 per cent. Richard Donnell, Director of Research, Hometrack said: “Over the last four months the supply of homes for sale has grown three times faster than demand – new supply has grown 15% compared to a 4.9% increase in demand…Looking further ahead, higher interest rates are likely to be the primary catalyst for a material change in market conditions.”

Return to House prices: the bears are back