Nationwide survey comes as member of Bank of England's rate-setting MPC warns spending cuts will hit economic growth house for sale Nationwide says house prices fell 0.7% in October.

UK house prices fell more sharply than expected this month as the downturn which began in the summer gathered pace.

The data from Nationwide came as a senior Bank of England policymaker warned that the government's spending cuts will damage Britain's economic growth.

Nationwide's monthly house price index showed that house prices fell by 0.7% in October, nearly twice as steeply as economists had expected. This takes the quarter-on-quarter fall to 1.5%, the biggest decline since April 2009.

October's fall took £2,376 off the value of the average UK home, which now costs £164,381.

Despite the 0.8% jump in GDP reported this week, Adam Posen of the Bank's monetary policy committee is concerned that George Osborne's plans to cut the deficit will cause significant damage to economic growth. Posen, an expert on Japan's "lost decade", told the Times today that the recovery was still weak.

"My forecast is the government's plans for 2011 and 2012 will have a material down-drag on inflation and on growth," said Posen. "My concern is on balance right now we are much more at risk of too-slow growth and, as a result, too-low prices," he added.

Posen was the only member of the MPC to vote for an increase in the Bank's quantitative easing at its last meeting.

Stimulating the economy through QE could help house prices, Nationwide argued today, by lowering borrowing costs and making more money available to lenders. However, an early extension of QE now looks less likely following the 0.8% growth recorded in the third quarter of 2010.

Source: The Guardian