House prices see biggest fall in years

LONDON (Reuters) - House prices fell at their sharpest rate in more than twelve years in November, the Nationwide building society said on Thursday, in another sign the property market is cooling fast.

Some economists said the growing signs of a housing market slowdown had strengthened the case for a cut in interest rates. Sterling fell against the dollar after the report was released.

The mortgage lender said the cost of an average home fell 0.8 percent this month -- the first decline since February 2006 and the biggest drop since June 1995 -- after a 1.1 percent rise in the previous month.

That took the annual rate of growth down to 6.9 percent, its weakest since August 2006, from 9.7 percent in October.

"The growing evidence of a significantly slowing housing activity boosts the case for the Bank of England to cut interest rates by 25 basis points to 5.50 percent in December. The decision currently looks balanced on a knife edge," said economist Howard Archer at Global Insight.

After years of double-digit growth, the housing market is expected to slow sharply over the next few months as lending conditions tighten in the wake of the global credit crunch and first-time buyers find it harder to make any purchase.

"Today's data bring Nationwide in line with recent gloomier reports from (Halifax), pointing to a more unequivocal housing market slowdown which, in turn, will underpin expectations of an imminent ease from the Bank of England despite the decidedly cautious rhetoric emanating from the Bank of late," said RBS Capital Markets.

The Nationwide data was the main depressant on sterling which fell 0.2 percent against the euro and 0.7 percent against the dollar.

"The house price data this morning is obviously much weaker than expected and we're likely to see some further negative news with data later today -- the mortgage approvals," said Ian Stannard, senior foreign exchange strategist at BNP Paribas.