"Well Mr King I suppose 5 successive increases in interest rates had nothing at all to do with it."

"What a pathetically ill-conceived comment.

So you don't consider that 5 succesive interest rate rises had anything to do with the fall in house prices? I would remind you the article is to do with the fall in house prices not the BOE's mandate to control inflation. In any event, to attempt to control inflation solely via interest rates is extremely unsophisticated, in that it increases the value of the pound thereby damaging exporting businesses whilst adding a double whammy to those businesses and business in general by increasing the cost of borrowing.

In addition it is naive to think that the use of one weapon in the economic armoury would control inflation.

marting, reading, uk

As long as lenders refuse to panic there should be no very serious problems and we can all benefit from the price of an essential commodity being reduced.

Frank Upton, Solihull,

Glad I ignored the first cautionary warnings 2 years ago. Following the 25% increase since then, I can stand an 0.8% drop in the least active house-buying month.

R Bowden, London,

For those that now suggest that there will never be any real drop in the value of houses in Central London because of the under supply, may I be so bold as to suggest that they look at the record of house prices in Tokyo over the last few decades.

In Japan, the collapse of the banking sector there in turn led to a dramatic drop of something like 80% in the value of houses in central Tokyo. History shows the reality. If anything is over priced, nothing will stop a return to more pragmatic values when a real recession occurs.

Chris Coles, Medstead, Alton, United Kingdom

The government should lower interest rates and everything will sort itself out. High interest rates hit the middle classes most, the Labour party are forever targetting this class, who have to pay for everything the government do. Also, raising interest rates is a government way of increasing bank profits, with no effort from the banks, by handing them money from the taxpayer without it passing through government books.

Lower interest rates, the poorer will be better off, the middle classes won't be so unhappy. But, that is against government policy.

Antony Rigby, Farnham,

Maybe if property prices come back to sensible level those of us who, despite having reasonably paid jobs, have been priced out of the market, will actually be able to buy something.

Peter, Birmingham, UK

Demand outstrips supply unfortunately and this great big crash everyone is hoping for will not happen in my view. A 10% drop will send my circle of friends running for their chequebooks! I bought a house 9 months ago that is now valued at £100,000 more. My house is for my family so I have no intention of selling plus I have a huge amount of equity to drop before i even begin to worry. Thats how it is in my part of London and I can't see it changing.

ditsydoris, london,

So, Nationwide's chief economist says "We expect this activity (falling house purchase approvals) to continue to fall back throughout the rest of this year, and into the next" Does this mean throughout december (the rest of this year) and up until spring 2008 (and into the next)? Well, I'm not a chief economist, but that's exactly what I would expect, same as most years.

People in the cocooned world of the financial markets seem to forget that whatever effects their machinations may have on the market, the stark fact is that there is a chronic undersupply of suitable properties in the right locations. London, for example is close to bursting point in it's near-centre locations. Property values here are supported by that fact, and anyone hoping for a purchaser bonanza in the foreseeable future is living in cloud cuckoo land.

The best bet for first time buyers is to buy with two or three others.

david, london,

price fall=good news

riccardo, brussels,

In short - the professionals don't have a clue - they know the tidal wave is coming but like all things in nature you cannot see where it will land and just how big it will be. If you follow the US which is not anywhere near the top of the wave -- late 2008 - 2009 is being talked about as being the top, the UK has not even begun to see the real affects of miss-lending. It will only be the UK Bank's personal agendas that will keep the market from sinking by returning to the over lending / miss lending policies - that is if the FSA retains its closed eyes as it has done for years.

After all - just where does the 'market' think the average Joe will be able to buy a property at 7 or even 10 x income if not through bad practices?

Thin air?

Paul, London, Canada

Yes, the "undersupply of property"! Strange isn't it that in this area 40% of new build flats are lying empty and rents haven't seen the meteoric rise that property prices have. There is only one important factor in any boom/ bust - i.e the ease of gaining credit and the subsequent difficulty that often follows!

Rick, Manchester,

Ad,

I think when the debts are mortgages, they can always be mostly repaid - as the financial institutions can repossess their customers' properties!

They might lose out in the short term if there is serious negative equity, but the burden is mainly going to be carried by poorer people who can't weather out the downturn.

Repossessions (and the fear of them) feed the rental market, which the banks can then supply into with their newly-acquired properties... they basically win whatever.

Dave, Ipswich, UK

To Mike In London and Marting in Reading and all the other bears i say "And all say all of us! Peter, in Southport Merseyside

peter, southport, UK

"Well Mr King I suppose 5 successive increases in interest rates had nothing at all to do with it."

What a pathetically ill-conceived comment.

The BOE's mandate is to control inflation. Which by the way still shows no real evidence of slowing down. If CPI included house prices which are by and large the largest payment a household makes. Then maybe interest rates would have been raised sooner and this mess could have been avoided.

I feel sorry for people with families who have had to buy a property in order to have somewhere to live. Have bought a property at the peak and now are going to suffer negative equity. I feel great schadenfreude at the roasting of the BTL brigade. They deserve everyting they get and I hope none of them get out unscathed.

Their sheer avarice and manic greed, along with the Mortgage companies are sincerely to blame for this debacle.

Klinnsmann, Woodford,

Great comments from everyone. Forgive the nerd in me, but:

What do you call a vicious circle with several dimensions? A vicious hypersphere...? That is...

Less credit availability = lower demand = lower house prices
lower house prices = less confidence = less demand
lower house prices = less equity release = less spending
less spending = slower economy = less jobs
less jobs = less demand = lower house prices
lower house prices = buy-to-letters losing equity = more supply
more supply = lower house prices
slower economy AND less credit availability = lower city pay
lower city pay = lower london house prices
lower london house prices = less confidence = less spending AND less national demand
lower house prices = negative equity = less confidence AND more supply

etc. etc. etc.

Peter Harvet, Malvern,

err, Is Gordon Brown hanged by his own petard or falling on his sword?!
Sorry Mike...!

Victoria, London, UK

Kevin of Manchester, you have fallen into the standard multiple trap. The average salary of one person may be £25k but that of two is probably double that figure. Result: a 100% mortgage on an average house is about 3.7 times a couple's income, which is not too outrageous. When I bought my first house in the 1970's I could not aford it on my own income and needed a second one to manage for several years. And that was not even in London! Nothing much new in the housing market, I fear.

Colin, Shrewsbury,

As with all debts they have to be paid. The financial institutions have finally woken to the realism that many of the debts on their books will never be paid and should never have been loaned in the first place.

It seems the speculators and debt addicts are going to have to go into rehab.

Ad, UK,

with banks going back to lending 3times salary it means thousands of tesco/wetherspoon workers etc have about £36000 to spend on property !!! people will know when prices are falling and wot need year-on -year comparisons

rupert schoenberg, prague, czech republic

PPI the biggest mis selling story to hit the banks since endowment mortgages, watch this space.

Jon Fox, blackpool, lancs

Credit Crunch, Bank Charges scandal soon to be followed by the biggest mis-selling scandal in History (Payment Protection Insurance) hot on the heels will be mis-sold Mortgages!

The Banks and Gordon Brown have been living in fantasy land for 10 years! guess what it's time to wake up!

I feel sorry for all the people that fell for Secured loans and expensive PPI who are going to be in BIG Trouble!

Pople renting will be in a win win!

DO NOT BUY A HOUSE NOW! RENT!

And if you have been stiched up by your bank complain!!!

Matthew, Hale , Cheshire

I suspect property prices will drop significantly next year. Credit has got out of control and there has to be a correction.

The buble is about to burst.

Tom Spark, London,

The drop in house value's reported by the Nationwide will almost certainly not be supported by other reports just like there 1.1% rise in prices during October was not supported by other house price report. But note evan if this report is correct it only reduces house price rises for 2007 to 6.9% hardly a disaster as some seem to think. As for Mr King he's just a killjoy if he and the other's who are supposed to be monitoring the economy had acted sooner we would not be in the financial mess we are presently going through.

Dave, Mold, Flintshire

As usual a great panic is about to come upon the property world, but why? every 8 or so years the property market has a slump, sometimes as high as 15%. then it levels for a year, then it starts to climb. It has been like this since the 1970's, when the word inflation reared it's ugly head. If you have just bought, hold on, all will be OK, in two or three years.

victor arram, westcliff on sea, essex

House prices have been rising at an unsustainable rate. This is due to the greed of vendors and estate agents. Prices have risen completely out of the reach of first time buyers. It is about time some sanity returned to the situation and prices hopefully will drop by at least 20 - 30%.

Terry Bannerman, Oxford,

Has this Archer bloke seen the cost of money nearby? It doesn't matter how much interest rates drop, there is no more cheap money and these cuts will not be passed on to the public whose appetite for cheap credit is disappearing.

a proctor, london,

One statistic revealed by the BoE data is that the average house purchase loan was just £138.8k, down about NINE THOUSAND POUNDS on the previous month. That's a lot of extra deposit to find if you are trying to mortgage to the hilt. In reality, it reflects the credit crunch is starting to bite as lenders reduce maximum LTV and impose tougher valuation standards. Fewer buyers can afford houses on these terms, sharply reducing demand, and applying pressure on prices.

Mark, Woking,

The truth is in the M4 data... any monetarist knows it. If M4 get out of control, all hell breaks lose. It always will.

The worlds central bankers should be strung up for allowing this to happen. But they will let it happen, because it is not an accident. It is deliberate robbery of the middle classes.

Daz, Cheltenham,

Mervyn King is suffering a bit of attention seeking latterly. We first hear his burst of morale hazard, then equity price and now housing price. Really what he should concentrate is the overall economy. If the overall economy warrants a rate cut, then do it, if not, then leave it alone. There is no moral hazard if the overall economy warrants an action.

Mark, Birmingham,

I too have been looking for over a year. Definitely going to carry on enjoying my cheap rent and buy twice as much house for half the money in a year or two..

For a year friends have been buying houses and smugly pointing out the error of my ways. They are singing a different tune now - two of them got spooked enough to try and sell over the last three months and now are accepting they are already in negative equity so are stuck - possibly for years to come.

TC, London, UK

So many have said this will never happen – “Supply is so tight”. However, it’s just one side of the equation. Demand was driven by cheap money and strong employment. The cheap money is slipping out of sight, and as we crest the top of the economic cycle, there will be an increase in unemployment and some stress selling. A decent drop in house prices is inevitable at that stage.

But it won’t be a celebratory tale for all. Some of those who have been unable to afford to buy will have reduced employment certainty (or no employment full stop), so won’t be able to take advantage. However, if you have enough cash for a decent deposit and secure employment, the bargains, as always, are found at the low end of the cycle.

Iain Mango, London, UK

Anyone who thinks that the economic consequences of "credit crunch" will be limited only to property prices may be in for a nasty suprise.
It is unfortunate that Labour's policies of higher public spending, combined with higher taxation and more business regulation, have both stoked inflation and damaged economic growth simultaneously; this double whammy leaves us far more vulnerable to an economic downturn.

BrummyDoug, Birmingham, England

Keep coming keep coming
soon i'll be able to afford a house! yeeehah!

jonny, london, UK

A brick still costs 35p ... just like it did in 1990 !

Pete, Swindon,

I just can't see there being a major crash, perhaps a period of cooling or static prices but as the article says the prices went up 1.1% the month before. With the UK popluation set to double in the next 75 years the fact is we're not building enough homes for this rapidly growing population. Most analyst predict the BOE to cut the interest rates by 0.5 - 1 % next year which will help steady to market.

Buying a house in a good area to live in still represents a wise long term investment in my view.

Lee, Manchester, UK

Brown is falling on his own petard. As chancellor, he leant on the Bank of England to hold down interest rates so the economy would boom, house prices would go up, he could brag about all this to the electorate, and also so he could spend hugely excessive amounts of taxpayer's money 'improving services' and creating new public sector labour voting jobs and brag about low unemployment. The effect of all this has been excessive consumer borrowing, hugely overvalued house prices and unimproved public services staffed by jobsworths many of whom earn enormous salaries doing pointless jobs. I personally want to see a big recession, a collapse in house prices, a government spending crisis, and all of the gravy trainers thrown on to the dole queues.

Mike, London,

Poor Gordon Brown. After waiting 10 years for the top job, all the smoke and mirrors he erected over those years to give the illusion of prosperity are being removed one by one, like an old stage set ready for the next production which is more likely to be MacBeth than the Midsomers Night Dream we've had.
The housing ATM machine is now closed, both personal and government debt are at unsustainable levels, and the next victim in the plot has to be employment, and ever rising taxation, and the removal of the layer on layer of benefits paid out to keep the electorate 'on side'.
As the political pundits have said as Labour won election after election, 'It's the economy stupid,' so the phrase will come back to haunt him.

Dudley Holley, Thorpe Bay, UK

Well Mr King I suppose 5 successive increases in interest rates had nothing at all to do with it.

marting, reading, uk

I dont know why people are still saying the market can be saved from a crash when it is so grossly overpriced. House prices have trebled in the last 10 years which is totally unsustainable and unrealistic.

Lets get prices back where they should be so people can get on with their lives and enjoy themselves without having to spend most of their wages on mortgage repayments.

A house is just somewhere to live and the emphasis on making money out of your own home should be taken away. Whatever your own home goes up by the next one you want goes up even more.
Mick

Mick Thomson, Gold Coast, Australia

Ha ha ha! If only the government had included house prices in their dodgy CPI measurement then now they might have some room to cut interest rates. Well actually they wound not need to because we would not be in the current situation - on the precipice of a housing market collapse. A measure of inflation which excludes the biggest living expense? What a joke that is. No wonder we are still on the boom-bust merry-go-round.

L Mckay, Newcastle, UK

May I quote mr brown, from 10 years ago.
'No more boom and bust', oops.

Our new prime-minister failed to control the supply of money to normal folk frightened of never getting on the housing ladder. They were only to eager to believe the salesmen and to take 5 or 6 times their salary, or more on the 'self-certificated (self-sacrifice?) mortgages.
Then when the capital dried up on this basis, the salesman, supported by the media, even had the cheek to suggest parents should pay for part of their childrens houses.
It was a deck of cards always ready to fall, built on a lack of common sense.
We have therefore had the boom in house prices. And as night fallows day, we now have the bust. It is interesting to note however that prices never slump, they drop like a stone. Once people know personally other people with negative equity, (we are already there in much of the country) they smile at the buy to let landlords whose house values are dropping and stay where they are.

Robert, Oxford, UK

bloody good news!

riccardo, brussels,

The steepest fall in price since 1995 - so far. I think this is a record that will be beaten time after time in 2008.

"The average cost of a home is now £184,099."
The average salary is under £25,000.

Do the maths. The figures just don't stack up. Lower interest rates next year is highly optimistic when we see food prices rising, rail fares going up by twice inflation and petrol prices taking off.

Kevin Herbert, Greater Manchester, UK

We've been looking for a house in a well-to-do west London suburb for the past three months and to say that there's been a fall there of 0.8% per cent is laughable. There's houses that were on for £520,000 that you could now pick up for nearer £460,000. Our flat's valuation has dropped by £30,000 in two months. I know of at least six properties that have been on the market for five months. There may be trouble ahead…

Simon H, west London,

The cheap credit-driven property-porn party is over. Nice while it lasted - here comes the hangover.

paul, London, London

HSBC's investment bank have issued a report saying that house prices are 30% overvalued. Does that mean that the bank's lending arm will now only issue mortgages with an LTV of less than 70%? If the answer is no then they've only got themselves to blame when they lose their shirt - not some sub-prime yokel in Arkansas who can't afford his repayments on his barn.

This overvaluation isn't news - experts have been saying it for the past couple of years, but the banks have continued issuing debt against overvalued assets thus inflating prices further. If the experts have been behaving like idiots, what's the man in the street supposed to do?

Burak Alpar, London,