House prices drop in January

House prices, measured by the DCLG House Price Index, fell by 0.7 per cent in January. House prices were down 2.2 per cent for the year from 3.3 per cent prior. A drop to 2.6 per cent had been expected.

MD Legal & General Mortgage Club's Ben Thompson:

It may seem to many that the housing market is a mixed bag at the moment. Although credit and gross lending remain constrained, there are still plenty of positive indicators. Affordability is likely to improve in the near future and 26% of consumers expect the housing market to be “better” or “much better” in 12 months’ time*. This is supported by the latest ONS figures, which show a firming in house prices across the UK.

IHS Global Insight's Howard Archer notes that perhaps the fall isn't all it seems:

It needs to be borne in mind that the ONS provides lagging evidence on house prices as the office calculates its index at the time when mortgages are competed.

Furthermore, both the Nationwide and the Halifax have reported an increase in house prices in February.