House prices are not going to fall more than a few percentage points because the government is not making any serious in-roads into immigration and thus demand will remain high at the low end and at the high end. The middle market will stagnate for a while as the government's diastrous economic policies of the last 10 years and failure to invest in growth of jobs and wealth creation lead to more and more redundancies. Middle England will feel the bite the most. If the English want to whinge on about the absence of affordable housing, let them. They should take it up with the government as to why immigration remains out of control; why building on flood plains continues; why coastal erosion continues, with the government even giving up on any possibility of land reclamation (tell that one to the Dutch who will laugh in your faces); and why Labour makes no acknowledgement at all to proposals put forward years ago to start building high and to abandon 2-storey boxes with a paved frontage.

peter allen, canterbury,

Carl (comment #2) is brilliant. It is well documented that retail sellers are unwilling to take losses and so do not lower offering prices, but the losses in this case have indeed occurred. His willingness to accept the loss he has already experienced in his flat at his recognition at the irrationality of others will do him well. My only recommendation would be to see if he can sell his flat at an inflated price and live in a rental until retail sellers capitulate, but that might end up being worse because of transaction costs. Go, Carl.

Steve, Philadelphia, PA, US

Just a quick note to Simon, London.

You state that Mortgages were based on a 5 times salary... When was the last time you remortgaged...?

Banks have been lending up to 7 and 8 times salary in their greedy, un-ethical ways.

I know of at least two people who borrowed this multiple and I reckon they are definitely not alone... not to mention all those Self Assessed Mortgage approvals (typical sales man will quote his OTE not his base...)

Don't be so naive.

Paul Sullivan, Chester,

I can't think of a more counter productive policy.
"Nationwide are increasing the rate of interest for those customers wanting a loan for more than 75 per cent of a property's value to reflect the increased risks involve"??

Surely this will only increase the chance of default on these mortgages and consequently the overall long term risk to the lender.
And for what? £708 per year extra profit. Does this really cover the expected loss of revenue that will be incurred due to the increase in defaults as a result of the higher lending rate?

I bought my 1st flat 2 years ago and had no choice even then but to take out a high LTV. Coming to the end of my fixed rate now I have no choice but to re-mortgage on a higher rate or accept the lenders SVR.

The banks are squeezing the very people who are most at risk for no perceivable gain.

James, Leeds,

In response to Soho Jim,
I don't find your analysis all that compelling. The article states a rate rise of 0.2%. Take your example of borrowing 90% of £400,000 for a homeloan. The increase in annual payments would be 0.002*(0.9*400,000) = £720.
This does amount to the borrower finding another £60 a month towards their mortgage. If they were able to borrow such a large sum however, even if it were on a five times salary multiple, it means that they are probably earning £72,000 a year.
How would finding an extra £60 a month on this salary force you to sell your home?

Simon, London,

Isn't it obvious that the lenders are therefore expecting house prices to drop by at least 25% and are insulating themselves against risk?

Is it just me? Am I paranoid? Maybe I'll go and see David Icke at the Brixton Academy.........

E Craig, Gourin,

I think this is good. I own a flat and want to get into a house. I've seen between £10 - 20k (depending on which valuation you believe) fall of the value of my Flat in the past 8 months, yet we are still told that prices will remain static.

I've decided to stay put as I have already lost 10% of the value, but have found that sellers are not willing to drop by the same percentage. Some people are predicting a 30% drop in the next 2 years, and I know that I would want to lose it off my flat rather than a more expensive house.

Carl, Bristol,

So reading between the lines its pretty obvious how much they they expect house prices to fall over the next 18-24 months

A McCarthy, Stratford Upon Avon, UK

Yes, Jamie is right. On the other hand the gov and the banks have managed to kill the goose that laid the golden egg !!!!!!

John, London, Uk

There is litle new beneath the sun. I can remember some societies increasing their margins by charging for higher percentage loans also lending on coverted flats and pre 1918 properties.
This gave them the ability to offer a good rate to the people who supply the money. The saver.

V Cooper, Yeovil, United Kingdom

Soho Jim.

My response to your analysis is - yes, so?

Lenders are not cashing in, merely reflecting changes in risk. Individuals should also consider risks when making financial decisions. If somebody stretched themselves to the limit to take out a mortgage on a £400k house then they did not sufficiently consider what impact increased interest rates would have on them and can blame nobody but themselves.

Alex Ritchie, Salisbury, UK

A Building Society is not a "charitable institution" as one post incredibly claims. It does not dispense its largesse to the needy. It runs a business for the benefit of ALL its members - both borrowers AND savers. Accordingly, this seems to me to be a prudent policy designed (among other things and as I see it) to ensure that my savings at Nationwide (at any rate) are somewhat more secure than at some wide-boy pseudo-slick operation like the soon to be renamed Bank of North-Eastern England

Rohan, Solihull, UK

They state the reason is the increased cost of borrowing, well it costs they make the same profit on what ever percentage the bank lends of a homes value. I would suggest the real reason is the banks are looking to insure against the housing crash, with the at 75% there might be some equity left to cover their loan.

Brian, Chorleywood, UK

Great get some normality back into the market. How long until you have to prove your income?

andy, Petersfield,

Lenders : Don't cash in on the crisis!

Mortgage lenders changing their terms to new borrowers is one thing, but applying the same rules to existing borrowers is potentially very damaging. Someone who borrowed 90%on an £400,000 property 2 years ago who are coming to the end of their fixed term mortgage and wishes to remortgage to fix the rate again, may find that not only has interest rates gone up, they now may have to find a further £60,000 to bring the loan to value down to 75%.

This may cause the owner to be in a forced sale situation, pushing the value of his property down. Lenders then may find themselves in trouble if their actions resulted in a high number of negative equity and people just start handing over keys to their home and declaring themselves bankrupt.

We will then have a UK originated credit crisis - just like the subprime in the US. Nearly 70% of households own their own property in the UK, the effect to the economy is very significant.

Soho Jim, London, England

This is GOOD news for 1st time buyers, who have been persuaded by greedy banks to borrow too much and place themselves and their families finances in peril.

Christopher, Ely, England

Quite frankly, who cares! I'm a first time buyer and i'm sitting on my hands. Any first time buyer would be mad to buy now. Prices are dropping and i've even had 1 seller phone me up!!! This would never have happened a year ago. I found it difficult even getting viewings till last August. Prices are falling fast now in my area and long may it continue!

Jamie, London, UK

There was me thinking Nationwide was a "building society" founded for charitable reasons to help the poor to be able to buy houses. Looks to me like they've forgotten what they're meant to be all about.

Andrew, Nottingham, England

I'm a would be first time buyer and this is absolutely fine by me. I've been looking at flats in London for 9 months and the market has turned to the extent that places are "worth" about 90% of what they were then. It's blind luck that i'm coming to a falling market, I tried to put offers on that I think would be accepted now but i dont think the estate agent even passed to the seller last summer.

So this is a confirmation to me of what i'm finding when I can be bothered to still spend saturday mornings being "sold to" by increasingly nervous homeowners and less cocky estate agents, I'm trying to find a home which is going to be falling in price for the next 5 or 6 years.

I want a mortgage I can afford but the unregulated competition from the fraudsters was forcing me to think about getting a dodgy mortgage.

Sanity comes dropping slow. Labour shafted our generation with high finance. Gordon Brown will be villified to an extent Maggie T would blanche at.

Neil, London,