House prices in UK fall as annual decline hits 1.4% House prices fell 0.4% in September, according to the Nationwide. Photograph: David Cheskin/PA UK house prices dropped by 0.4% in September, increasing the annual rate of decline to 1.4%, according to figures from Nationwide building society. The lender's monthly snapshot of the market, which is based on mortgages it has approved during the month, puts the average price of a home at £163,964. Its quarterly report on regional markets underlines how much prices vary around the UK, with the average in London reaching £301,168 while the Northern Ireland average stands at £107,719. September's price drop followed a sharp rise in August, which was originally put at 1.3% but has since been revised down to 1.1%. Nationwide's chief economist, Robert Gardner, said monthly price changes had "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." He added: "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. Figures from the Bank of England showed the new Funding for Lending scheme had little impact on borrowing in its first month of operation, but Gardner said it should support activity in the market in future. Nationwide is one of the lenders which has signed up to the deal, which offers low-cost funds to banks and building societies to encourage them to make more mortgages available. However, he warned: "Labour market developments will remain of paramount importance in deciding the trajectory of house prices. There are grounds for caution on this front, as the unusual combination of rising employment and declining economic activity that was evident in the first half of 2012 is unlikely to be sustained. This month the society also compared regional prices with their 2007 peak to see which areas are still furthest from those levels. It found prices in Northern Ireland were still furthest from peak, with prices down 53% compared with 2007 levels. Wales was also towards the bottom end of the scale, with prices currently 16% below their all time high. In England, the southern regions have generally come closest to approaching the peak, in particular London and the area immediately around it. Prices in the capital are now just 2% below the level seen when the market was booming in 2007. London continues to defy economic logic. To be just 2% below its peak in a paralysed economy is preposterous," said Russell Quirk, director of online estate agents eMoov.co.uk. I'm less confident than the Nationwide that the Funding for Lending scheme will have a major impact. Yes, it may make credit more available and cheaper, but will it get through to the people who need it? Cheap and available is idle chatter if it's not getting through to higher loan-to-value borrowers.