LONDON: The annual growth in price of houses in the U.K. has slowed down to its lowest in nine years in August — 2.3 per cent — according to Nationwide building society. The mortgage lender said that the house prices fell 0.2 per cent on the month, a reversal of July gain (2.6 per cent), indicating there is no housing market boom in sight.

The Bank of England had earlier released figures showing that mortgage lending grew at the weakest rate in three years in July. However, there was encouraging trend in evidence that the number of mortgage approvals had indeed gone up in July to its highest levels in the past year.

Nationwide said the central bank’s decision in reducing the interest rate to 4.50 per cent had led to spurt in inquiries by buyers for property. It also said the house prices will continue to fall but there is no likelihood of a crash.

Nationwide’s group economist Fionnuala Earley said while the market activity has apparently stabilised, it does not show the beginning of a further period of sustained growth the house prices. “Even though wage inflation is almost twice the rate of house price inflation, affordability is still an issue, particularly for first-time buyers, and it will take some time for the balance to be redressed.”

A year ago, the prices had been increasing at an annual rate of 20 per cent.

The average price of a home in the country fell to 157,310 pounds in August from 158,348 pounds the month before, said Nationwide.

Nationwide said the house price to earnings ratio is now higher than at its last peak in 1989. And an average first-time buyer has now to raise a deposit of 17,000 pounds, which is more than 50 per cent higher than the average deposit needed in 2003. This deposit works out to 62 per cent of the buyer’s annual earnings, compared with 20 per cent in 1969.

Earley said while average house prices of first-time buyers have increased by 161 per cent over the past 16 years, the average mortgage size is up 138 per cent.