Report indicates gloomy housing outlook

People might not have to take on such large mortgages in the future, as a new study has indicated that house prices started to drop last month.

Data from Rightmove showed that asking prices for properties in England and Wales dropped by 0.7 per cent over the past month.

In the month to November 10th, the average asking price for a home fell to £239,986 - down from the £241,642.

This means that the annual rate of house price inflation dipped from 10.4 per cent to 7.9 per cent.

"Prices are set to flatline in 2008," commented Miles Shipside, commercial director of Rightmove. "While we do not expect a price drop overall, there will be parts of the country that are over-priced and over-supplied for the likely levels of affordability and demand next year.

"Whilst bargain hunters will be paying less for these properties, prices will rise where demand continues to outstrip supply in quality areas close to major conurbations, especially London."

Mr Shipside added that the Bank of England was unlikely to cut interest rates unless it was convinced that house prices would not surge as a result.

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