Issued on the first day of two that the Bank of England's Monetary Policy Committee meet to consider interest rates for the next month, Property website Rightmove's interim report says house prices are falling as the housing market is now finally responding to higher borrowing costs.

The group says that both buyers and sellers now recognise that price rises are becoming unsustainable.

Prices fell to £195,306, down from £196,198 as at 10th July (the cut-off date for Rightmove’s last house price index) – a decline of almost £900 or 0.5% in 3 weeks.

This interim report is compiled from asking prices of actual properties put on sale through estate agents who advertise on the Rightmove property website from 10th to 31st July 2004 (3 weeks) – a sample of approximately half the market.

The group dismissed figures from Nationwide Building Society released last week showing that the market was re-accelerating with prices rising by 2.1% during July. Nationwide's figures are based on mortgage lending, whether Rightmove's are based on the asking price of property when it is first put up for sale..
weeks.

The decline in prices follow a much smaller rise in asking prices (of 1.2%) reported in Rightmove’s July house price index and contrast starkly with rises of around 2.5% in each of the previous two months. Asking prices rose by a total of 9% over the 3 months up to July 2004.

Miles Shipside, Rightmove’s commercial director, said: “This is excellent news for the British consumer and the economy overall. The strength of the housing market was becoming a source of growing concern to many economic commentators, not least to Mervyn King and the other members of the Monetary Policy Committee."

"Consumer borrowing was starting to respond to the rate increases, but the housing market had proved remarkably resilient. Last week’s announcement that household debt in the UK had surged through the trillion pound mark, followed by perhaps surprisingly strong figures from Nationwide based on their sample of mortgage lending, did nothing to reassure the powers that be.”

“Now, at last, we are getting incontrovertible evidence that prices are coming off their peaks, and that higher borrowing costs are starting to act as a cold shower to douse the flames of the red hot market. I’d say it’s just what Mr King ordered."

"The homeowner is beginning to see that ever higher prices simply won’t stick and that greater realism will be the order of the day over the next few months. The number of properties available for sale continues to grow, so the astute buyer is well placed to strike a good deal on a home purchase.”

“We’ll find out on Thursday whether the MPC feels the economy is responding sufficiently to the four rate rises over the past 9 months to warrant keeping interest rates on hold, but it must be a positive signal that the upward spiral of house prices is coming to an end, with no hint of a crash.”

Six out of ten regions have seen falling or static asking prices over the three week period, with the northern regions (North, Yorkshire & Humberside, and North West) still seeing rises.