House prices fell for the fourth month in a row in February as evidence mounted that banks’ borrowing costs are again on the rise, putting further strain on households and companies. Financial Times (Saturday)
The Nationwide Building Society reported another fall in house prices, dragging the annual inflation rate to 2.7%, its lowest level in two years. The figures came as Bank of England data showed the number of mortgage approvals for property buyers remained at historically low levels in January, indicating weak demand from potential homebuyers.
But hopes that lower official interest rates will soon be passed on to banks’ customers have dwindled over the past month as strains in the markets for bank borrowing have re-emerged. The three-month interbank borrowing rate rose yesterday to 5.74%, almost half a percentage point above the Bank of England’s 5.25% official rate.
Money-market traders said nervousness about the creditworthiness of one or more UK banks had led some participants to withhold funds from the lending market and others to seek larger than usual amounts.