This lastest reduction brings the annual rate of increase down to just 6.9 per cent - a figure which HBOS research showed stood at 9.6 per cent in November 2006.
Nationwide has also asseted that although market sentiment has weakened, it is still showing a degree of volatility.
However, the lender has suggested that the roll-out of the final phase of HIPs could well reduce the available housing supply in the short term.
Fionnuala Earley, Nationwide's chief economist, said: “The reduction takes us back in line with the softening trend we have seen in the second half of the year and is consistent with our forecast of house price growth of 5-8 per cent in 2007.
"The 0.8 per cent monthly fall is the first since February 2006 and the largest monthly fall since June 1995. However, monthly data can be volatile and the sharp fall this month is partly a reflection of the strength recorded last month and in November last year.
"A better picture of the underlying trend is captured in the three-monthly growth rate. This too fell back into line with its softening trend in November, returning to 1.5 per cent from the 1.8 per cent recorded in October. The price of a typical house in the UK is now £184,099, almost £12,000 more than this time last year."
Market now responding to weaker drivers
“November’s data confirms that the housing market is indeed cooling in line with the weakening in housing market drivers. Poor affordability, weaker house price growth expectations and the effect of earlier increases in interest rates have all affected demand in the market.
"House purchase approvals, a good barometer of real market demand, have weakened from a peak of 128,000 a month in the final months of 2006 to 102,000 in September. We expect this activity to continue to fall back throughout the rest of this year, and into the next."
Sentiment is changeable…
“Housing market sentiment can itself be an important driver of the housing market, and at this point in the cycle it can easily swing on the back of every new morsel of data reported. There is a plethora of housing market indicators and looking at the headline figures alone can sometimes be confusing.
"Indeed at this point in the housing market cycle there can even seem to be conflicting messages in consecutive months of the same series. With sentiment so important to the housing market, an oversimplification of the headline data can have real effects.
"This highlights the importance of looking at overall trends, rather than focusing on one month’s data in isolation and more importantly, examining the underlying fundamentals."
…and can be sensitive to interpretation of data
“New data from derivative trading in the City shows that within the space of one month expectations of house price growth over the next year have fallen from -2 per cent to -7 per cent without there being any really significant change in the underlying housing market conditions during the period.
"This rapid swing is likely to be a reflection of current financial market uncertainties and could be distorted by speculative or hedging activity, but it illustrates how quickly the mood can change and thus the importance of looking carefully at the real message key data is presenting.
“Looking forward, it is clear that there are uncertainties in the market, not least from the continuing turmoil in the UK’s financial markets and the overall impact that this may have on the future performance of the UK economy.
"We already expect economic conditions to be more difficult for the housing market next year, but we do not expect a recession. Furthermore, with interest rates on the way down and the continued issue of undersupply of housing in the UK market, the underlying fundamentals are perhaps more positive than the recent swings in sentiment might suggest.
"It will be some time before the true impact of HIPs on the market becomes clear. The scheme could speed up the process by removing those not serious about moving, but it is likely to reduce the numbers of speculative sellers which could limit the available supply and make the house search process longer.
"The final outcome is likely to depend on the importance of speculative sellers in the market, which is difficult to judge. Arguably there will be more of these in a rising market, so the introduction of HIPs at this stage in the cycle may have less of an effect than at other times. But if the scheme does reduce the available supply for purchasers, given existing issues of undersupply in the UK, it is likely to offer some further support to prices in the short term.”
