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House prices fell by a record 15% in the 12 months to October, as would-be buyers continued to be squeezed by rising household costs and a lack of mortgages, Halifax said today.
The UK's largest lender said prices had fallen by 2.2% during the month and warned that housing market conditions "remain challenging".
Halifax's latest snapshot shows the average price of a property in the UK fell to £168,176 last month, a fall of almost £4,000 since September and almost £30,000 less than in October last year.
The annual drop is the sharpest since the index began in 1983, and means that in the past year prices have fallen faster than at any point during the housing crash of the early 1990s.
Halifax's own measure of annual price changes, which compares figures from the last three months with the same period last year, showed a smaller fall at 13.7%, but this is also the biggest on record.
"Housing market conditions remain challenging in the face of the significant pressures on householders' incomes and the reduction in the availability of mortgage finance since last summer," said the lender's chief economist, Martin Ellis.
Over the past year average earnings have failed to keep up with rising prices, particularly fuel and food prices which have increased by 40% and 11% respectively. Halifax said this had had a detrimental impact on householders' spending power and "severely curbed" demand.
The ongoing impact of the credit crunch, which has seen many lenders put up prices and pull deals for borrowers with small deposits, has also limited the number of buyers.
Despite last month's emergency rate cut, banks have continued to increase the cost of tracker mortgages and many have pulled loans for borrowers with less than 25% to put down as a deposit.
Although a further, hefty cut in interest rates is expected this lunchtime, lenders have warned this is unlikely to result in a new choice of cheaper loans.
Improved affordability
However, Halifax said falling prices had improved affordability for those able to raise funds.
The average house price is now 4.92 times the average salary - the first time in four-and-a-half years that it has been below five times salary, and well below last July's peak of 5.84 - and Ellis said he expected the ratio to continue to fall in coming months.
Howard Archer, chief UK economist at IHS Global Insight, said he believed buyers were still struggling to afford homes and this would continue to push down prices.
"On top of this, faster rising unemployment, major concerns over the depth and length of the recession, and widespread expectations that house prices will come down markedly further seem set to depress housing market activity and prices for some considerable time to come.
"Faster rising unemployment will lead to a marked rise in the number of forced house sales, and it will also reduce the number of potential house buyers."
Halifax's figures are in line with those reported by Nationwide Building Society last week, which showed prices had dropped by 14.6% during the past year, losing 1.4% of their value in October.
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