House prices will fall by 25%, claims boss of Britain's biggest building society

The boss of Britain's biggest building society warned last night house prices could fall as much as 25 per cent from last year's peak, pushing millions of homeowners into negative equity.

Nationwide chief executive Graham Beale said he thinks prices will keep on falling next year and the recovery will not begin until 2010 at the earliest.

If he is correct, about £50,000 will be wiped off the value of the average home in Britain which will collapse from £186,000 at its peak in October to just £140,000.

This means prices would tumble to levels not seen since February 2003, a disaster for the millions of people who have bought a home over the last five years.

Mr Beale said: 'I think we are into 2010 ,

'I think that next year we will see a similar pattern to this year...we will see further falls in house prices.

'And I think before we really get to the new world, whatever that is, I think we will be into 2010.'

Mr Beale's gloomy forecast, made in a BBC interview, has been backed up by house builder Redrow today, who also warned the mortgage squeeze could linger until 2010 as its annual profits tumbled by nearly half.

The company urged the Government to take action to end the mortgage drought.

'It is our view there may be no meaningful increase in the availability of finance in the wider mortgage market before 2010,' chairman Alan Bowkett said.

The Flintshire-based firm continued the gloom from the sector after underlying pre-tax profits fell by 46 per cent to £65.1 million in the year to June 30.

Meanwhile, Mr Beale's forecast means up to 2.5million homeowners will be pushed into negative equity by the collapse in house prices.

This is when the size of your mortgage is bigger than the value of your home, a disaster for anybody who urgently needs to sell their property.

The only winners from the sharp fall in house prices will be people who want to buy, but have not been able to afford the spiralling cost of property in Britain.

If average prices do fall to £140,000, millions more people will find they can finally get onto the housing ladder.