Article Lifted in verbatim from Business Times Online - because it is interesting and well written.

More evidence of the weakening housing market emerged yesterday when figures showed that house prices had fallen by 1 per cent in the three months to January.

Halifax said that the cost of an average home last month was, at £197,244, only £80 more than it had been in December, but the largest mortgage lender in Britain brushed off forecasts of a housing slump this year or next. Martin Ellis, chief economist at Halifax, said: “We expect a more subdued market, but we don’t expect any falls in UK house prices on a national level. Some regions may experience slight falls, but these will be balanced by increases in the South of England and Scotland.”

Figures released last week by Nationwide, the second-biggest lender, indicated that house prices had fallen by 0.1 per cent in January, the third consecutive monthly decrease.

Worries over the housing market have spread to Central London, where prices for prime houses and flats in the £1 million to £2 million bracket were flat, Knight Frank, the estate agent, reported. Prices of Central London property worth up to £1 million rose by only 0.2 per cent in January, while homes priced in the £1 million to £5 million bracket rose by 0.7 per cent as demand fell among bankers with smaller bonuses to spend.

However, an unexpected surge in demand for homes worth £5 million or more in Mayfair, Chelsea, Belgravia and Knightsbridge pushed up prices for all of the prime Central London market by 1 per cent during January.

Liam Bailey, head of residential research at Knight Frank, said that he expected London house-price inflation for 2008 in the £1 million to £2 million bracket “to be not much more than zero”, compared with 5 per cent growth in house prices in the £5 million to £10 million bracket and 8 per cent in the £10 million-plus bracket.

Howard Archer, of Global Insight, said: “The fact that house prices did not plunge in January reinforces belief that the Bank of England will limit a widely expected interest-rate cut on Thursday to 25 basis points from 5.50 per cent to 5.25 per cent.”

However, a KPMG survey also found that nearly one in four borrowers were struggling to meet their monthly loan payments.