According to the August Nationwide House Price Index, house prices fell 1.9 per cent over the month, and 10.5 per cent since August 2007. This is the largest year-on-year drop since 1990.
The building society has calculated that the average UK house now costs £164,654, the lowest figure since the start of 2006.
Nationwide says it is surprised at the new mentality of UK borrowers.
Nationwide Chief Economist Fionnuala Earley, says: “Tracker loans have been cheaper than fixed rate loans since October 2007, but in spite of that the proportion of borrowers choosing a fixed rate loan has been increasing. This is unusual for UK borrowers who, as the Miles Review illustrated, attach enormous weight to the level of initial monthly repayments, rather than considering the potential movements in prices over a longer period.
“This change in behaviour could be an indication that borrowers are keen to be sure of their outgoings in uncertain times and wish to protect themselves, even though the choice may be more expensive in the short run.”