Plunge in house prices outstrips the crisis of the 1990s

The crash in house prices is now the worst ever in Britain. HBOS, which has just been taken over by Lloyds TSB, will publish figures next month showing that the decline from last year's peak now exceeds the fall during the 1990s.

From the top of the market in May 1989 to the bottom in February 1992, the bank's seasonally adjusted index of prices fell by 13.1 per cent. That fall has already been exceeded since the market peaked last August.

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So a slide that took nearly four years in the last recession has been repeated in just 13 months – and shows no sign of stopping.

The speed of this crash is consistent with predictions that the market will fall by 25 to 30 per cent before bottoming out, possibly in 2010. That would make this slump deeper than than in the 1990s but shorter.

Prices fell 10.9 per cent in the year to August, according to HBOS, but at the end of September it will publish the figure showing the record crash.

The annual rate of decline is expected to peak at almost 20 per cent early next year, with prices continuing to slip for at least the bulk of 2009.

The Bank of England last week extended its special liquidity scheme until January to enable banks and building societies to refinance their mortgage books. But figures from the Council of Mortgage Lenders show the supply of loans remains low. Lending last month fell a further 12 per cent from July's level to give the lowest August figure since 2002.

Some lenders are increasing their interest rates, while growing economic uncertainty means few potential buyers want to commit themselves.

This month's Treasury housing package has failed to provide substantial support. CML economist Paul Samter said: "The decision to increase the zero stamp duty threshold to £175,000 is helpful, but will not kick-start the market in itself." The markets are looking to the Bankof England to cut rates to inject some confidence into the market.