House prices plummet by more than 10% in a year... the biggest drop since 1990

Around 300,000 householders are already in negative equity, with hundreds more every day finding their mortgage is bigger than their property's value.

Yesterday the Nationwide building society said prices are falling at their fastest rate for 18 years.

For the first time since 1990, price falls have escalated into double digits, dropping 10.5 per cent over the last year.

The LibDems warned homeowners they should accept the brutal reality that prices are 'crashing', rather than 'simply falling'.

Nobody's interested: A lack of buyers has led to a slump in Britain's housing market

Treasury spokesman Vince Cable said: 'Compared with other forecasters, Nationwide is usually conservative in its predictions of house price falls. So when it tells us there
is a big fall, we know something very serious is happening.

'All the signs are that we are at the beginning, and not the end, of a very painful process.'

Shadow Chancellor George Osborne said: 'What began as a fall in prices is fast becoming a housing crash.'

House prices have now been dropping for the last ten consecutive months, including the latest 1.9 per cent drop this month. This has never happened before  -  further proof that the current collapse is more dramatic than the last one in the 1990s, according to Nationwide.

For homeowners who bought in recent years, the latest figures fuel their worries that they paid too much for their property.

The average house price is now £164,654, compared to the peak of £186,044 reached in October 2007.

At this level, anybody who has bought a home since May 2006 paid more for their property than it is currently worth.

Economists said yesterday that house prices will keep on falling for the next two years, possibly even more.

The consultancy Capital Economics, which is the most negative about the market, expects prices will fall 35 per cent by 2010 from last year's peak.

The Royal Institution of Chartered Surveyors also predicted that prices will continue to fall.

Many buyers agree, which is why they are holding back, hoping to get the same home for less next year.

Speculation about possible stamp duty relief is also adding to the problem, according to the National Association of Estate Agents.

In a poll of nearly 1,200 estate agents, 56 per cent have lost at least one sale since the start of speculation that the tax may be scrapped, or cut.

The changes to mortgages are also having an impact, with banks refusing to give cheap loans to those with small deposits.

Prices of desirable country houses - mansions, large cottages and farmhouses - are starting to tumble, reveals upmarket estate agent

Savills said: 'Prime country property was initially less affected than London, but is now following suit.'

The firm is selling 45 per cent fewer homes than last year, and reported yesterday that profits in its estate agency arm slumped 88 per cent during the first half of this year.

It has been forced to sack staff, but refuses to say how many have lost their jobs. Savills employs around 3,000 people in the UK out of 20,000 worldwide.