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UK House Prices Fall Again in December

British house prices fell for a second straight month in December, taking the annual rate of inflation down to its lowest since May 2006, a survey showed on Friday, in further evidence of a housing market slowdown.

The Nationwide building society said house prices fell 0.5 percent on the month in December after a 0.8 percent decline last month. The annual rate of house price growth cooled to 4.8 percent from 6.9 percent in November.

That took the average house price down to 182,080 pounds ($361,500) from 184,099 pounds last month.

"The housing market has weakened significantly in the closing months of 2007 after holding up more strongly than expected in the earlier part of the year," said Fionnuala Earley, Nationwide's Chief Economist.

"Most indicators now show that demand is responding to the pressures of weak affordability, past increases in interest rates and the lower house price expectations that we had expected to take hold earlier in the year."

The Bank of England cut borrowing costs to 5.5 percent this month to help shore up the economy in the wake of the credit crunch but although more rate cuts are expected, Nationwide said the housing market did not look poised to bounce back.

"Lower interest rates are more likely to stabilise market activity rather than re-ignite it," Earley said.