House prices come to virtual halt

House price growth was on the brink of grinding to a complete halt in July, with monthly inflation of just 0.1 per cent, the latest figures reveal.

This is the slowest rate of growth since April 2006, Nationwide's latest report said.

Annual increases in house prices fell from 11.1 per cent in June to 9.9 per cent in July and the average cost of a home hit £184,270, up just £200 from the previous month.

Fionnuala Earley, chief economist with the building society, said: "After surprisingly picking up steam in June, house prices were almost unchanged in July and their underlying trend growth resumed a downward path.

"The three-month on three-month rate of growth – often a better indicator of the underlying trend of house price inflation – slowed to two per cent and resumed the downward path that had been interrupted in June."

While a rise in interest rates to six per cent is still "firmly on the horizon", Nationwide said that the risk of "monetary overkill" is highlighted by weak household income growth and mortgage payment shocks.

Ms Earley described the interest rate decision facing the Bank of England as a "tough balancing act", with tight consumer finances on one hand and resilient economic growth on the other.

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