By Daniel Hunter

The Nationwide has predicted that house prices will stay flat or drop slightly over the next year despite a gradual recovery in the UK economy.

The Nationwide has suggested that the Bank of England's new Funding for Lending scheme, aimed at boosting credit, could support the market.

Prices fell by 1.4% in the year to the end of September, the Nationwide said.

“UK house prices declined by 0.4% in September, after recording a 1.1% rise in August. Monthly price changes have been impacted by a number of one-off factors this year, such as the ending of the stamp duty holiday that cannot be controlled by the usual process of seasonal adjustment," Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said.

“For this reason the annual rate of house price change is a better guide to the state of the market at present. On that basis, the housing market remains fairly stable, with prices 1.4% lower than September 2011.

“Looking forward, policy measures such as the Bank of England’s Funding for Lending Scheme should provide support for activity in the housing market by ensuring the availability of credit and lowering its cost.”

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