Prices have fallen by 4.4 per cent since this time last year, the biggest annual fall in house prices since December 1992 when prices were falling at an annual rate of 6.3 per cent.
But Nationwide points out that prices are still 5 per cent higher than two years ago and 10 per cent higher than three years ago.
Chief economist Fionnuala Earley says: “The pace of house price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market.”
Seven months of PRICE fallsShe points out that falling house prices combined with higher inflation makes the Bank of England’s monetary policy committee’s decision more difficult.
Liberal Democrat Shadow Chancellor Vince Cable says: “This freefall in house prices is becoming worry-ingly reminiscent of the Tory recession of the 1990s. The housing market has been seriously overvalued for some time, thanks to massive consumer debt.
“Even the Government now admits that we will see a large correction over the next one or two years.”
The Royal Institution of Chartered Surveyors senior economist David Stubbs says: “The difficulties in the mortgage market are stretching accessibility and threaten to reduce transaction levels by 40 per cent this year.
“With buyers unable to secure financing on reasonable terms, some sellers are now choosing to cut prices. The market will only stabilise once transaction volumes recover.
“The Government and the Bank of England should continue to implement measures to restore the smooth functioning of the mortgage market before the drop in transactions and prices begins to really hurt the economy.”