House prices have fallen by nearly 4 per cent during the past year, their fastest rate of decline since 1993, figures showed today.
Britain's biggest mortgage lender, Halifax, said the cost of a home slipped by a further 2.4 per cent during May to stand at an average of £184,111.
On an annual basis house prices have now fallen by 3.8 per cent since May last year, the biggest year-on-year drop since April 1993.
The latest figures are in line with those reported by Nationwide Building Society last week, which showed house prices fell by a record 2.5 per cent during May, prompting warnings that the market could be heading for a deep and prolonged correction.
The average home now costs 6.8 per cent less than it did at the beginning of the year, with prices falling in four of the past five months, while property values are 9.4 per cent lower than at their peak in August last year.
Martin Ellis, Halifax chief economist, said: "The decline in prices is caused by the difficulties created for potential house purchasers by the rapid rise in house prices in the last few years, a squeeze on spending power and the reduction in credit availability. These factors have curbed housing demand."
But the group stressed that the price falls needed to be seen in the context of the strong house price gains experienced in recent years, with the cost of a home soaring by 79 per cent during the five years to August 2007 - an average rise of £88,000.
Halifax added that it continued to expect high employment levels, low interest rates and a shortage of new homes being built to support housing valuations.
The number of new mortgages approved for house purchase also fell by 49 per cent during April compared with a year earlier, according to the Bank of England, while the Royal Institution of Chartered Surveyors said the number of new buyers in the market dropped for the 17th month in a row in April to a record low.
The housing market is unlikely to receive a boost from the Bank of England's Monetary Policy Committee today, with interest rates widely expected to be kept on hold at 5 per cent due to inflationary pressures.
Howard Archer, chief UK and European economist at Global Insight, said: "The latest data on the housing market are undeniably alarming.
"Clearly, the downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is now biting hard."
He added that Global Insight now expects house prices to fall by 12 per cent during both 2008 and 2009.Reuse content