Rate cut fails to lift property prices

The Nationwide said yesterday the average house price fell 0.2% last month, reversing July's gain and dragging the annual rate of growth down to just 2.3%, the weakest for nine years.

The survey showed that the Bank of England's interest rate cut at the beginning of August had done little to breathe new life into a moribund housing market.

The Nationwide, however, was upbeat: "In spite of a fair deal of bearish comment, the housing market has remained quite resilient this year following last year's interest rate hikes. Price inflation has slowed gradually, but is still positive, and activity has been creeping up since the end of 2004," said Fionnuala Earley, the Nationwide's group economist.

She said sellers were adjusting prices down to more realistic levels and that had led to an increase in buyer numbers and greater optimism about sales.

The Nationwide's annual house price inflation figure is down from 19% in August last year and is likely to fall to zero in the next two or three months as prices have been stable for the past year.