Graham, London. That's exactly why Crash Gordon shouldn't have fiddled the inflation figures in the first place. If house prices had been included in the inflation measure that the BoE uses interest rates to control they wouldn't be at their current riduculous levels of 8 or 9x income. They WILL fall sharply back to historic norms of no more than 3-4x income and no one will be able to stop this. The lesson? Inflation is a bad thing - whether it is bars of chocolate or houses. Politicians who pretend that they can walk on water (or end the boom/bust cycle) will get their fingers burned - unless, like Blair, they get out just in time and make a few million a year telling anecdotes about their time as PM whilst the patsy who stepped in takes the blame for all of the chaos. Well done Tony, you've proven that you were the smart one of the double act after all!

Graham, Oxford, UK

The property market has been buoyed for years by people investing and reinvesting equity from their properties fueling the trend to build porfolios and get rich in the process. All good and well when the markets are bullish but when the sentiment changes and conditions become less tolerant to such behaviour we shouldn't all be pushing for cuts in rates. Those not on the ladder will benefit from those with portfolios forced into selling, releasing properties on to the market which may have previously been kept vacant. Those on the fringes who a struggling to pay for their home may benefit also if they sell up and re-enter the market once conditions become more favourable. The net impact on the market will be an easing of pressure for new homes and easier entry on to the ladder for those priced out whilst staving off inflation on a more macro level.

David Patel, London, UK

I thoroughly agree with all the other comments. I am one of the many people who has been struggling to get on the property ladder. Up until now it has been extremely easy for people to get credit. Unfortunately I have no sympathy they knew the risks involved. Hopefully property prices will fall enough so that the people that have been sensible and waited will soon start to reap the benefits.

TM, Essex, UK

To LT,
"plunges from 11.1% to 4.2%". Plunges, hardly, 4.2% still represents growth" That WAS growth, but not sure STILL represents that.
4.2% is for the past 12 months. But if you extrapolate the past 3 month performance (Nationwide average is -0.4% per month, or -1.3% for the quarter) the outlook becomes -5.2% for the year. That is whooopping drop, isn t it?
And by the way is in line with the Global Insight, and Lombard projections. So all fits!
However, another issue is the "seasonal" adjustment (i call it doctoringt) that Nationwide has done on its numbers. The "raw" average price change in the past month has been a whoooppping 0.9% down... how in the world did -0.9% become 0.1%?? Marvels of statistics whent the statistician is on the lender payroll, I suppose.

Roger, Richmond,

Statistical fiddling somehow allows them to report only a 0.1% headline fall. The average house has actually fallen from £182,080 in december to £180,473 - more like 0.8% fall and a total fall already of 3% since October's high of £186,044! Sounds like a crash to me.
But as a mortgage lender Nationwide has a significant vested interest...
The full report is at www.nationwide.co.uk/hpi/historical/Jan_2008.pdf if anyone care's for facts and not headline spin...

Dave, London,

"even the big crash everyione seems to talk about when rates were 16% (of which we will not see again) prices dropped around 10% for a year or so but then regained as usual....

mark, wales,"

I think you might want to go and look at your facts there Mark. In the last "Crash" at the beginning of the 90s, prices fell for four/five years in a row ... totalling a lot more than just a 10% loss! In those days there weren't any 100%+, self-cert mortgages or as many buy-to-let mortgages. House prices nowadays are also much, much higher compared to average wages. There are of course going to be a good deal of people who have made a lot of money from rising prices over the last decade, but those sorts of rises can't go on forever and I fear for the masses who have overstretched themselves i the last few years. Interest rates may indeed never reach double-digit figures again, but for those struggling now, even another half a percent could push them over the edge!

Andy, Bath,

A slight drop of house price inflation will not worry the BOE one jot. Their remit is to control inflation, not ensure property prices continue their upwards spiral.
Poor reporting.
And the economy? If I pay less for my house then I have more to spend down the shops thereby boosting the economy rather than the profits of the banks and BTL locusts.

GARETH JONES, DUSSELDORF, Germany

Relaxed. London. You are talking rubbish. 'Serious' BTLs will no longer have the increasing equity to plough into new property. In addition, immigration will significantly fall in the next few years due to the rest of Europe loosening their restrictions, hense less demand for rental property. Trust me, the party is coming to an end.

GARETH JONES, DUSSELDORF, Germany

I'm stockpiling my money so that when you retards can't pay your mortgage I can pick it up at auction. However, I read the government is planning even more communist market controll's like 'loan repayment holidays'!?! Isn't this a free market?

Wayne Simpson, Ruskington, Lincolnshire

Most serious BTL's are in it for the long term and will make huge profits. Rental markets (in the south) are on the up. Its a self fulfilling prophecy. We may lose the novice BTL investor in the short term due to the credit crunch but there are enough serious landlords out there to keep swallowing up properties. The key to successful property investment is 'dont let go'. We all will need to breathe in in 2008 - but towards the year end things will be looking up - interest rates wil have come down and the housing market will go mad again.

Relaxed., London,

Prices fell a hell of a lot more than 10% in the last crash as someone wrongly said below!

Let me just say I know nothing about economics investments etc I live by the use of logic and my own experience.

We bought our house (a 4 bedroom semi) in 1976 for £14,000 by 1988-9 it was valued at £150,000. We actually sold it at the end of 1991 for £78,000..nearly a 50% drop!.. the next house we bought cost £71,000 in 1991 it is now valued at £260,000 in 2007

My son bought his house in 1997 for £68,000 it was valued at £250,000 in 2007.

A slowdown is definitely in the air you dont need to read about it..you just have to ask people. The reality is that houses down my road that are for sale just arent selling, some have been on the market for 8 months or so..it will take a while for the sellers to budge..they dont want to believe that prices are sliding. I rang a few local estate agents to ask if this is whats going on and they confirmed what I've said above. Seen it all before in 91..

Phil, Pagham, west sussex

In light of the recent irresponsible lending and borrowing which has enabled the price of property to rise to such dizzy heights, the idea that rates should be cut to support house prices is simply nonsensical. Two wrongs arent going to make a right.

K Jirackova, North Sheilds, Tyne and Wear

A house price correction would be very welcome.

If prices fell back to the average Nationwide house price in January 2006 of £158,478 it would be bad news for the property speculators who invested in property to make a quick buck on a rising market. It’s also bad news for anyone who has borrowed over 90% and more than 3.5 their wages in the last 24 months.

For the rest of us mere mortals – the majority of us - it would mean we can get a foot on or move up the ladder without having to sell your souls to the banks to service huge mortgages which we can’t afford.

For anyone who bought a house more than two years ago – it wouldn’t make a jot of difference.

In Brighton you now need a joint income of £83K to buy the average terrace house at £292,211. In Jan 06 the average terrace house was £232,700, which needs a joint income of £66K.

I employ seven staff in Bright who’s average wages are £26K. There is no way they can get on the property ladder and there is no way I can

NJ, Brighton, Sussex

PS. 0.1% decline in Jan after 0.4 in December and 0.9 in November - doesnt that show that the slowdown is slowing down? Watch for an increase in Feburay's figures.

Relaxed., London,

House prices have been going up like a rocket for years, a small blip and suddenly you're crying for a rate cut! So much for 'safe as houses'!

Property speculators need to face facts - house prices sit atop the biggest ever bubble in credit - that credit bubble is now deflating, and with it so will house prices. It's inevitable, and cutting interest rates is very unlikely to have any impact in the short to medium term.

Tim, London,

The price falls are good news. I don't see why there should be interest cuts to prop up unsustainable property prices. People knew they were buying overvalued. Why should we bail out all these property investors who have prevented us first time buyers getting in the market. I say let them crash and burn.

Gavin , London,

Falling prices ARE a good thing (by and large). Falling asset values ARE NOT. They make consumers nervous, slow spending and investment and economic growth. Interest rates should not be used to prop up the property market - but too large a downturn will fundamentally effect the economy and potentially destroy jobs. The adjustment needs to come over time and has to be managed by the Bank of England - economic stability IS part of their remit - not just the bling management of inflation - which, taken on its own is a meaningless measure.

Graham, London,

When houseprices fall, maybe more people can afford a house. And people allready having a house do not remark any difference when they sell and buy a new one.

The sufferers are greating a gloom:
the financial media and stockdealers etc;
the banks of course, the investors of every kind,
to get the central banks to save the gamblers by lower rates.

But the biggist sufferers at the end are going to be homeowners and ordinary people world over, who are paying soaring prices.

leo jaati, jormakka,

What a great idea! Let's drop interest rates, fuel even more consumer spending and borrowing (if you can get it) and keep the whole inflated mess in the air for as long as humanly possible - or, at least until Our Great Leader leaves the stage exit right with his 'reputation' in tact as Prudence.

I'll put the other argument. House prices are unsustainably high and interest rates need to rise to cap inflation - just what the Bank of England is there to do. Those who speculated and came to the party in the last couple of years are, unfortunately going to get burned. But that's called capitalism. Some banks are going the same way as Northern Rock but, hey, that's capitalism too.

But it will encourage saving and wealth generation, the only way you can improve an economy in the long term. If we continue down the same path we go back to the 70's (Labour again) but, regretably, there doesn't seem to be anyone brave such as Thatcher to sort out the mess.

Rob, Isle of Wight,

Mark,

Prices did collapse not 10% but 34% nationally on average over 5 years back in 90-95. Although we are unlikely to see interest rates at 16% at least in the short/medium term your opptomism maybe a little misguided. It is presumed that interest rates will go down substantially this year. However if inflation is impoerted from china, as predicted interest rates will rise, unemployment will increase and property prices will sell off. This, I believe is a good thing. We need a good shakeout and a reminder that we can not continue to live off these unprecended level of debt. However if there is no imported inflation, I agree there will be no or little house price easing.

It does seem to me though if we do not have a sell off soon we are creating a bigger bubble of debt that could potentially have catastophic consequences down the road

John, Rethymno, greece

Not everyone should be calling for a cut in rates immediately. Over the last 20 years the buoyant property market has allowed homeowners to accumulate equity, much of which has been invested in building portfolios further exacerbating house price inflation. Increasing or maintaining rates can be positive, for one, It puts a pressure on those with porfolios to downsize. Secondly those on the fringes of making mortgage payments may find that selling up and waiting for more favourable conditions lends itself to them affording a bigger/nicer property as prices fall and interest rates recede. Overall we should find more and more properties coming onto the market especially from those taking profits from their portfolios. This should ease pressure on housing since many properties are currently vacant and make it easier to for those not already on the ladder to step onto the first rung. Let us not forget that interest rates stave off inflation thus maintain the worth of our money.

David Patel, London, UK

It is time people stopped regarding houses as an investment. Houses are to provide shelter and a home. There should be a restriction on house ownership in order to prevent the huge amount of speculation that is occurring.
I think that the mortgage lenders should also be restricted to making mortgages for house purchase and improvement only like it used to be before the wide boys took over and allowed lending for personal use including holidays, car purchase and buying buy to lets.

Pedro, Manchester, U.K.

Property is the place to be, anyone who believes there is going to be a crash just does not understand property investment at all, if you had listened to all the jargon and advice on here you would have lost thousands upon thousands over the last few years......

dont listen to all the doom mongers they are all simply hoping, guessing or get paid a measly wage for writting articles. you need to listen to the investors with real life knowledge..

Yes property may stagnate, or even a few small single digit losses but the medium term is excellent,
interest rates will remain low, buy to let is an addition to firsttime buyers increasing demand etc etc etc. even the big crash everyione seems to talk about when rates were 16% (of which we will not see again) prices dropped around 10% for a year or so but then regained as usual....

i think the people who keep critising property are purely jealous and envious and have lost serious money by saying now is the wrong time (all the time).

mark, wales,

Yet another media channel trying to hype the market with stupid shock headlines.

Prices not growing as much as before is not prices falling but prices going up at a more moderate rate. But I guess that does not sell papers.

The government and banks want a slow down to stabalise things and it seems to be happening. I wish all the papers and tv stations would stop using shock headlines implying a crash is happening when one is clearly not (touch wood). Media hype is what causes economic panic, just look at Northern Rock. If a crash happens, we all lose out, to try and encourage it is one of the most stupid things anyone could do.

Tom H-B, Windsor,

We need house prices to fall in relation to people's earnings. What we don't need is 'doom & gloom' headlines just because they aren't rising as fast as they used to. Why can't we have positive headlines about houseprices moving towards realistic levels ?

ian, norwich,

This is nothing compare to what is coming in regards to housing market. I believe this is only a tiny scratch because the real stagnation and hause price crash is slowly but shurely coming, the catastrophic house crash can not be avoided, it is simply simple, it can not be supported ant it does not make economic sens to justify the valuation of housing market today and unfortunatly people and bank tend to forget this every other 10-20 years and than always is to late for a lot of poor people that run after the herd mentality

J Pristine, London, England

aren't falling prices a good thing ? to help bring inflation under control ?

KK, Kister,

When will the economic media stop regurgitating the same "received wisdom" that ever-rising property prices are a good thing????????
Surely steadily falling house prices over a couple of years (as in the early 90's) would help many people to get a foot on the housing ladder without having to spend 50% of their income on 50-year mortgages????
The only people who should be rubbing their hands with glee each time the value of their property goes up are those who are holding a second one as an investment or those who aim to sell-up and move to France where property is much more reasonably prices.

Rob, Paris, france

Agree with cww - but would also add that prices are still " surging " at double the rate of inflation.
Frankly given the data the headline does the Times a disservice.
At some stage everyone is going to have to recognise that the economy will not sustain house asset price hyper inflation.
At the very least house price inflation is going to have to come down to the cpi inflation target.and probabely lower initially The longer this is delayed the bigger the financial earthquake eventually.

James, NI, UK

So the average house fell in value by around £200 this month.

Why would should this ever be taken into account when the BoE considers interest rates. When property was being pushed up far beyond any reasonable value was the BoE raising interest rates to compensate?

Josh, Sheffield,

Statistics are a wonderful thing, what you need to remember is that the figures given are the average of the past 12 months, not the change in one month. So if prices have continued to grow at 10% for the first 8 months in the past 12, then for the last 4 months prices have dropped on average 8% each month since then. Having sold a property last November I clearly observed a 10% market fall from September 07 onwards.

DP Sussex

DP, Shoreham, Sussex

They knew the cost of buying the house when they bought it......surely.

Robin, Northumberland,

I agree with CWW. "pressure for a UK rate cut comes as annual house price growth plunges from 11.1% to 4.2%". Plunges, hardly, 4.2% still represents growth. House price increases have not been commensurate with wage increases, and as a result there are many people that struggle to get a foothold on the property ladder.

People have existed for far too long on easy credit, using their homes as extensions of their spending capability. It the time for tighter credit and it is the time for prudence. Is that really a bad thing? At least we might have fewer property themed television programs on the televsion, and to that I will be truly grateful to our American sub-prime home owners and innovative Finance boffins who work in Securitisation!

LT, London,

Prices only fell by a tiny 0.1% - what's the problem?

cww, suffolk,

I would hardly say a drop of 0.1% for January warrants a rate cut......

I just think the Times is trying to grab headlines.....

Michael, Windsor, Windsor

Maybe soon we'll be able to afford to buy a house - once the bubble starts deflating - as I'm not seeing many price reductions yet. Sellers seem to be hoping that rate cuts will kick off a new bubble as they did in 2005. Beware Mervyn!

Davie P, London,

going down, going down.....
it is not enough!

riccardo, brussels,