London house prices fall for first time in eight years

House prices in London fell for the first time in eight years in the third quarter, according to Nationwide.

Prices in the capital fell 0.6% between July and September compared to a year earlier, the first time prices have fallen since the third quarter of 2009.

Nationwide said this was also the first time London was the worst-performing region in the UK since 2005.

In September alone, UK house prices were up 2% year-on-year compared with a 2.1% increase in August, leaving the average price of a home at £210,116 ($281,402).

Nationwide said low mortgage rates and healthy employment figures were propping up demand for housing, but these were being partially offset by falling household incomes.

"Housing market activity, as measured by the number of housing transactions and mortgage approvals, has strengthened a little in recent months, though remains relatively subdued by historic standards," Nationwide chief economist Robert Gardner said.

"The lack of homes on the market is providing ongoing support to prices."

On a monthly basis, house prices increased a seasonally-adjusted 0.2% in September.

Prices increased across the country except London, with East Midlands, south west of England and West Midlands among the biggest gainers.

Nationwide said it expected the Bank of England to moderately raise interest rates later this year amid signs that the economy is evolving broadly in line with the central bank's expectations.

"Providing the economy does not weaken further, the impact of a small rise in interest rates on UK households is likely to be modest," Gardner added.

"This is partly because the proportion of borrowers directly impacted will be smaller than in the past. In recent years the vast majority of new mortgages have been extended on fixed interest rates."