Pound falters after house prices take sharp tumble

The pound has faltered in forex trading today (August 1st) on news house prices have been struck by their sharpest decline in three years.

Nationwide's official data shows property values recorded their fourth fall in five months in July, ending the month 13 per cent lower on their 2007 peak.

The building society's figures indicate the price of a typical British house was down 0.7 per cent last month, bringing the annual drop to 2.6 per cent, with the average dwelling now costing £164,389.

This news comes on the same day the Bank of England's Funding for Lending Scheme is being launched, which aims to lead to cheaper mortgages at higher loan-to-values.

Some banks and building societies have already responded to this initiative by making sharp cuts in their long-term fixed-rate mortgages - but these products are for those with high deposits of at least 40 per cent the price of the abode.

Commentators are reserved as to whether the Funding for Lending scheme will make a difference to the number of people buying homes - with the Bank remaining hopeful it will encourage first-time buyers in particular.

Nationwide's chief economist Robert Gardner noted the recent house price results reflect the current recession.

"The weaker price trend observed in recent quarters is unsurprising, given the disappointing performance of the wider economy," he said.

Mr Gardner continued that the current economic downturn grew more intense in the three months to July, with the economy contracting by 0.7 per cent quarter-on-quarter.

"This disappointing outturn can be only partly explained by unusually wet weather and the impact of an extra bank holiday during the quarter," he commented.

At 12:00 BST, sterling was 0.3 per cent lower versus the dollar to £1 buying $1.56, while it shed 0.3 per cent against the euro, so £1 now equals €1.26.