The Government’s house price index supports other reports of falling house prices in the UK as mortgage lending tightens and Brits become reluctant to buy.

The Communities and Local Government figures were released yesterday and showed that house prices were 0.3 per cent lower in July 2008 than in July last year.

The report also showed that in July 2008 the average UK house price stood at £217,171. However, despite the apparent reductions in value the rate at which house prices slowed in the quarter up to July 2008 was just 0.5 per cent compared to the 1.3 per cent fall up to April 2008.

For those who were planning to sell up before the credit crunch hit, the National Association of Estate Agents (NAEA) recommends an extension to increase the value of a property.

According to its survey, 92 per cent of NAEA members agree that an extension can increase the value of a property. Commenting, chief executive of the NAEA, Peter Bolton King said: “In the current market it is understandable that home sellers are keen to try anything to increase the value of their home.

“For this reason, a well planned and built extension, that creates additional open living space, could potentially increase the value of a property.”

Nevertheless, there is no denying that the mortgage market has just taken another blow that will, according to experts, see mortgage rates soar once again. Following the collapse of America’s investment bank Lehman Brothers, the UK’s largest mortgage lender HBOS’s future is hanging in the balance.

And, since the news that has caused the stock market to buckle, inter bank lending rates (LIBOR) have soared from 5.5 per cent that had allowed banks to reduce rates, to 6.8 per cent that will soon be reflected in UK mortgage rates.

Moneysupermarket.com’s head of mortgages Louise Cuming comments: “I fear we’ll soon see lenders raising mortgage rates due to this. We may also see further tightening of already very tight lending criteria.

“It is a vicious circle now, with consumer confidence being knocked by all of this news – and when people are worried they are far less inclined to make the biggest purchase of their life,” she added.

© Fair Investment Company Ltd