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House prices have slumped by 14.6% since last October after 12 consecutive months of falls, Nationwide Building Society said today.
Figures from the UK's largest society showed the average price of a home in the UK had fallen to £158,872 - almost £30,000 less than a year ago. Prices have been driven down by falling sales volumes.
Although the monthly fall of 1.4% was slightly lower than in September, when prices dropped by 1.5%, the annual rate of decline has increased from 12.4% last month and is the largest drop ever recorded by Nationwide.
The figures are in sharp contrast with October last year when Nationwide last reported a monthly price rise. At that point annual price growth was running at 9.7% and the impact of the credit crunch was only starting to be felt by would-be buyers. Mortgage approvals were also running in line with their long-term average and 40% of first-time buyers were borrowing more than 90% of their home's value.
Now lenders have pulled back from offering large loans and withdrawn many of their most competitive deals, and housing activity has plummeted.
Nationwide said the number of completed house purchase transactions as a proportion of the total stock of mortgages was now at its lowest ever level since records began in 1974.
Meanwhile, other data shows the time taken to sell a property has increased by more than 60% in the last year, to almost 12 weeks. Nationwide said the housing market had stalled because buyers and sellers had reached a stalemate.
The society's chief economist, Fionnuala Earley, said: "The sharp falls in prices recorded by the main transactions-based measures of house prices has not yet led to an increase in market activity.
"One possible explanation for this is that it is only those sellers willing to negotiate on price that are seeing sales go through. While others refuse to cut their price, the levels of activity are constrained."
She added: "Asking prices have fallen this year, but the rate of decline has been significantly behind that of other measures. Consumers still expect prices to continue to fall into 2009 and will therefore be reluctant to trade without some discount on the asking price."
Fewer forced sales
Earley said the fact sellers felt they were able to hold out on price suggested there were fewer forced sales than during the last crash of the early 1990s, when interest rates were more than twice today's level.
However, she said the weakening economy could force some people to reassess their needs and lower their expectations and prices.
"As the economy weakens further there is likely to be more movement on asking prices as sellers adjust to the prevailing conditions and reassess their own needs," she said.
"Some may choose not to sell after all, thus reducing supply, but others will adjust their prices accordingly. A looming recession and continued financial market instability have uncomfortable implications for the housing and mortgage markets, and will undoubtedly affect the pace of recovery in house prices."
Nationwide's figures will make grim reading for borrowers who bought properties at the peak of the market last summer. Earlier this week the Bank of England said around 500,000 homeowners held mortgages that were bigger than the value of their property and that a further 15% fall in prices could result in 1.2 million borrowers facing negative equity.
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