Read the release from Nationwide in full

UK house prices are still continuing to rise, increasing by 0.7 per cent during September, despite turmoil in the global financial markets and the resulting crisis at mortgage lender, Northern Rock.

Figures released today by Nationwide, the building society, show that British house prices rose from 0.6 per cent in August when the credit crunch began to impact worldwide markets.

Fionnuala Earley, chief economist at Nationwide, said: “The financial turmoil that began in early August extended into September, dampening hopes that the uncertainty sparked by the crisis would blow over quickly.

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"Higher wholesale funding costs are now clearly leading to a reassessment of the pricing of credit in the mortgage market. As expected, this has not had an immediate impact on house prices, but the longer-term effect will undoubtedly be to take some of the froth out of the market."

On a three-month basis, there was some evidence of an underlying slowdown to inflation, with house price growth falling from 2 per cent to 1.6 per cent.

And on an annual basis, house price inflation slowed from 9.6 per cent to 9 per cent. However, in September last year, the UK housing sector was entering a robust period when the average price of a standard house cost £184,723.

Nationwide said that while some lenders are still willing to lend at cheap rates - Northern Rock will still give mortgages to borrowers at 5.9 times salary in exceptional circumstances - but other providers are now making home loans more expensive.

The British Bankers Association said today that mortgage approvals have fallen from 66,965 in July to 61,051 in August.

The value of mortgage approvals for house purchase also fell from £10.51 billion in July to £9.39 billion last month.

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