House prices continued their downward trend in February for the fourth month running, the UK's largest building society said today, but it insisted that recession was still a "remote risk" for the UK economy

Nationwide said that the 0.5 per cent February fall meant house price inflation was 2.7 per cent, the lowest annual growth rate since November 2005. Eight months ago it was running at 11.1% and in January it was 4.2 per cent.

It is the first time since 2000 that house prices have fallen for four months in a row.

The average home in the UK is worth £179,358: despite the recent slide that value has improved by around £12.75 a day during the past year.

The data from Nationwide follows other evidence of a slowdown in the housing market released this week. The Land Registry said that the number of houses sold in November 2007 was down by a fifth on the same month in 2006, while the British Bankers' Association said that the number of loans granted in January for new home purchases, as opposed to remortgages, was one of the lowest figures on record.

Fionnuala Earley, chief economist at Nationwide, cautioned that the big drop in annual house price inflation between January and February could be misinterpreted.

"The trend in prices is clearly weakening, but the size of the drop in the annual rate between January and February perhaps overstates the rate of cooling as it partly reflects the particularly strong increase in prices in February last year,” she said.

The latest figures add to evidence of a downturn in the housing market and may heighten worries about a significant slowdown in consumer spending. Commentators believe that there will be a considerable period of time before any return to the rate of growth seen in the housing market in recent years.

Nationwide said the softening in house prices during February was not unexpected given the falls in demand that have been seen recently, with mortgage approvals for house purchases falling sharply since the autumn. The group said that a reluctance on the part of buyers to enter the market was not surprising given the uncertainties and that it was unlikely that activity would return to long-term trend levels for some time.

However, Nationwide said that while there were several factors that were restricting housing market demand, including reduced affordability and lenders tightening their mortgage criteria as a result of the credit crunch, the fact that the UK did not seem to be heading for a recession would provide some support.

Ms Earley said: “It seems clear that we will not see recent rates of growth, in either the UK economy or housing market, repeated for some time. There is an unprecedented amount of uncertainty about future economic conditions, but if the Bank of England’s central projection that the economy continues to grow is correct, conditions for the UK housing market are perhaps less gloomy than some would have us believe."

Nationwide is forecasting flat house prices in 2008 as a whole but many economists are predicting falls of up to 5 per cent.

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