House prices tumble to new record

Nationwide Building Society said the annual drop was the biggest ever recorded by its index.

Prices slid by a further 1.7% during September, the 11th consecutive month of falls, to leave the average property in the UK costing £161,797.

Despite the sharp annual fall, Nationwide said there was evidence that the rate of decline was stabilising.

Fionnuala Earley, Nationwide's chief economist, said: "House prices have now fallen for 11 consecutive months, but the monthly rate of fall has been almost unchanged in the last three months.

"The less volatile three-month-on-three-month series has also barely changed for the last three months, after accelerating in the first half of the year. This may suggest the beginning of some stabilisation in the pace of house price falls."

The housing market has been hit by the combination of stretched affordability and the mortgage drought due to the credit crunch.

In September last year, before the full force of the credit crunch struck, annual house price growth was running at 9%, mortgage approvals for house purchase were in line with their long-term average and 40% of first-time buyers were borrowing more than 90% of their home's value.

But Ms Earley said consumers' confidence in the market changed almost immediately following the problems at Northern Rock.

She said: "As expectations have collapsed, house purchase approvals have fallen to less than a third of their long run trend. It seems that we would need to see a significant shift in consumers' sentiment before we begin to see any real recovery in activity and subsequently house prices."