House prices fall at record rate

The cost of a home dropped by a further 1.8% during August to leave the average property price at £174,178 - a record 12.7% less than in the same month last year, according to Britain's biggest mortgage lender Halifax.

Annual house price inflation, which measures prices during the previous three months compared with the same period a year ago, also dropped to a new record low, with falls of 10.9%.

It is the first time this measure has recorded a double-digit drop since records began in 1983.

Halifax chief economist Martin Ellis warned that despite the Government's announcement on stamp duty earlier this week, market conditions were set to remain "challenging". He said: "The pressure on householders' income, together with the reduction in the availability of mortgage finance due to the global financial markets crisis, is resulting in both lower property prices and activity levels."

The group's figures are in line with those reported by Nationwide Building Society last week, which showed that house prices fell by 1.9% during August, contributing to annual falls of 10.5%.

The property market has been hit by the double impact of stretched affordability and the mortgage drought. Many buyers are sitting on their hands until the outlook for the market is clearer, while those who do want to go ahead with a move are struggling to raise the mortgage they need.

Earlier this week the Government announced a package of measures to help struggling homeowners and those trying to get on to the property ladder, including increasing the level at which stamp duty kicks in from £125,000 to £175,000 for one year.

But the measures received a subdued welcome, with most commentators saying they would do little to boost activity in the housing market or halt the current price slide.

Seema Shah, property economist at Capital Economics, said: "The housing market correction continues full steam ahead. House prices nose-dived again in August, taking the annual fall in prices even further into uncharted territory. With the recent slump in mortgage approvals yet to be fully reflected in house price data, the correction is set to intensify."