House prices have seen their fastest fall in more than 12 years, according to the Nationwide building society...

The cost of an average home fell 0.8% this month - the first decline since February 2006 and the biggest drop since June 1995 - after a 1.1% rise in the previous month, the lender said.

That took the annual rate of growth down to 6.9%, it’s weakest since August 2006, from 9.7% in October.

* seasonally adjusted

Commenting on the figures Fionnuala Earley, Nationwide's Chief Economist, said: “House prices fell by 0.8% in November, reversing October’s surprisingly strong performance. This brings annual house price growth down to 6.9%. This is back in line with the softening trend we have seen in the second half of the year and is consistent with our forecast of house price growth of 5-8% in 2007.

“The 0.8% monthly fall is the first since February 2006 and the largest monthly fall since June 1995. However, monthly data can be volatile and the sharp fall this month is partly a reflection of the strength recorded last month and in November last year. A better picture of the underlying trend is captured in the three-monthly growth rate.

“This too fell back into line with its softening trend in November, returning to 1.5% from the 1.8% recorded in October. The price of a typical house in the UK is now £184,099, almost £12,000 more than this time last year."

Traditional seasonal lull

Paul Smith, chief executive of haart estate agents, commented: “I would agree that the underlying fundamentals of the housing market are still in place and this should dispel any talk of a crash in prices. Interest rates are set to come back down early next year and a continued shortage of available stock will help to buoy the market.

“We are currently experiencing the traditional seasonal lull, with lower levels of activity and this is likely to be more prolonged than usual as affordability remains strained and market uncertainties linger.

“As the Nationwide and Land Registry indices show, we are going through a period of market adjustment and stabilising house prices. However, we are expecting the market to bounce back in the second half of 2008 when this period of adjustment has run its course.”