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British house prices fell for a second straight month in December, even after the Bank of England cut interest rates, in a sign the property market slowdown is gathering pace and could spell trouble for the economy next year.
The Nationwide building society reported yesterday that house prices fell 0.5 per cent this month, taking the annual rate of increase to just 4.8 per cent, the lowest since May 2006.
"There is undeniably a very real - and growing danger - that the housing market could see a sharp correction next year," said Global Insight economist Howard Archer.
The survey was the latest in a string of reports to suggest the British economy would slow sharply next year after recording growth of about 3 per cent this year.
According to Nationwide, house prices in northern English cities were already 3 per cent lower than last year. Tighter lending conditions for more than a million people, who expected to to refinance fixed-rate deals, could also add pain to consumers already mortgaged to the hilt - with outstanding housing debt stands at more than £1 trillion.
Household finances look set to be stretched further in 2008 by rising food and energy costs, and as wages fail to keep pace with inflation. Accountants KPMG predicted yesterday that a record 130,000 people would be declared insolvent next year.
