Despite the fact that many people rushed out to secure fixed mortgages during January when the mortgage rates started to increase in order to lock down better long term rates, house prices still started to drop. One reason for the drop is that many predict the market is going to grow stale again in the coming months as the rates increase and interest in home buying decreases.

Without much movement in the market house prices will continue to decrease, and some are even predicting that the prices are going to stray ‘sideways’ over the rest of 2012. According to new figures released from Nationwide, house prices fell by about 0.2% during January which is reasonably steady compared to the last quarter of 2011.

This is great news for first time home buyers because low mortgage rates and falling house prices make owning a home the cheapest it has been for ten years.  However, LTV’s remain high and the large deposits required for purchasing a mortgage are keeping many first time buyers from getting a leg up on the property ladder.  Tighter credit restrictions are also keeping many first time home buyers away from the housing market.

House prices still remain about 0.6% higher than they were in January of last year, which means that even without the best mortgage rates the housing market is managing to claw back a bit of its momentum. Therefore, the great housing dip that many analysts are afraid of occurring may not be half as bad as many people think.

Of course if the demand from buyers continues to stay low, and more properties are released into the market as a result of foreclosure, or simple sales without much uptake then house prices will still continue to edge downwards slowly. Chief economist for Nationwide, Robert Gardner stated that he believes house prices are not going to increase much over the course of the year due to the fact that most potential buyers are not going to be able to afford the high deposits.

He added that as more properties continue to flood onto the market the prices are only going to go sideways and possibly begin to fall over the next few months.  Those who can take advantage of the market will see some great mortgage deals including a new fixed mortgage from Chelsea Building Society set at a low 3.18% for five years.