Headlines November 2005 October 2005 Monthly index* Q1 '93 = 100 314.6 314.6 Monthly change* 0.0% 1.3% Annual change 2.4% 3.3% Average price £157,139 £157,107 * seasonally adjusted

House price inflation settled back in November following a temporary rebound last month, according to the Nationwide building society today.

Average house prices were unchanged in November and remain almost identical to May’s level. The annual growth rate now stands at 2.4%, down from 3.3% last month and significantly lower than at this time last year when house price inflation was 15%.

The price of a typical house in the UK is £157,139 compared to £153,439 at this time last year.

Fionnuala Earley, Nationwide's group economist said: "As we expected, the strong rebound in prices in October was temporary, driven by buyers postponing purchases until after the August base rate cut and the overall picture remains one of stability rather than acceleration."

"November’s data suggests that the market has settled back down to the pattern of small rises in some months and small falls in others, with prices overall growing only very slowly. The 3-months changes show that after a pause in the summer the trend in house prices has returned to a steady cooling pattern."

"Encouragingly, forward indicators continue to suggest that confidence in the market remains. Estate agents are reporting increasing buyer interest and that buyers and sellers are reaching agreement on price more readily. This reflects an overall picture of stability rather than acceleration."

The building society said that the UK housing market appeared to have achieved a so-called "soft landing" in the past six months, with prices stabilising but not crashing.

"High house price inflation in recent years has reduced affordability which has and will continue to act as a brake on the market by limiting the number of first-time buyers who can enter the market, said Fionnuala Earley. "Nevertheless the chart below shows that mortgage costs remain well-below the levels seen in the late 1980s."

Home ownership will become more affordable over time if earnings grow faster than house prices.

The chart presents some scenarios on how quickly affordability would improve under a range of assumptions about house price inflation. Nationwide assumed that the annual rate of growth of post-tax income is 4% over the next few years and that interest rates will soften in 2006 before returning to around 4.5% in the longer term.

Ms Earley said: "If house prices remain constant it would take 4 years for affordability to reach its long-term average level, but if house prices rise by 2% per year it would take just under 8 years."

"Of course, these scenarios are removed from reality and the actual length of time will depend on other factors too, not least levels of housing supply and demographic change. The bigger short-term risks are from the labour market and interest rates. But the more stable macroeconomic environment at present has allowed both inflation expectations and long-term interest rates to fall."

"In addition, the Bank’s current strategy has been successful at containing labour market and interest rate risks and the housing market has responded very favourably. Therefore, even though house prices doubled since 2000, affordability did not deteriorate as much relative to long-term levels due to lower long-term interest rates, which keep monthly mortgage costs low."