House prices fell 1% in February 2010 after nine consecutive months of price rises, with the decline attributed to the expiry of the stamp duty holiday and the snowy weather according to Nationwide.

Martin Gahbauer, Nationwides, chief economist, said: “There is evidence from a range of indicators that the market may have lost momentum in early 2010 as the stamp duty holiday ended and house hunters were obstructed by the icy weather. New buyer enquiries dropped sharply in the New Year and there was also an associated drop in the number of new mortgages taken out by homebuyers in January. This drop in demand seems to have fed into agreed prices during February. At this stage, it is difficult to gauge how much of the drop in housing activity is attributable to one-off factors and therefore whether February’s fall in prices is just a temporary blip or the start of a new trend.“

The annual rate of price inflation still increased from 8.6% to 9.2% year-on-year, with the average price dropping to £161,320.

There has been an increase in borrowers taking out variable rate deals over fixed rate mortgages, with a steady increase since July 2009. The number of new loans taken out on base rate tracker or discounted variable rate deals hit a low of just 14%, but by December it had risen to 39% with the proportion of fixed rate deals decreasing from 80% to 54% over the same period.

Gahbauer, said: “It is not yet clear what has driven the steady increase in preference for variable rate deals. One possibility is that borrowers believe that base rate will remain low for longer than they did in July, making them more willing to take on interest rate risk over the course of the deal period. The relatively dovish messages coming out of recent Bank of England Inflation Reports are supportive of this explanation. Another possibility is that as house prices rose considerably over the course of 2009, new borrowers increasingly preferred to take out cheaper variable rate deals in order to keep their initial mortgage payments relatively low.“