House prices dive

The Nationwide Building Society has reported that house prices have fallen 2.5% during May, which is the biggest fall ever reported by the Building Society since it started creating reports back in January 1991.

This takes the run of months in which house prices have dropped up to 7 months, the longest continuous run of house price falls since 1992. This leaves house prices down 4.4% on what they were this time last year, the biggest annual fall also since 1992.

This brings the price of an average house in Britain to £173,583 - a fall of almost £5000 over the month and £8000 over the year. But even with these falls house prices are still up 5% over the last 2 years and 10% over the last 3 years.

Howard Archer, chief UK economist at Global Insight, said: 'The plunge in house prices in May is a real shock, and will fuel concern that we are now headed for a sharp correction.

'The downward pressure on house prices coming from stretched buyer affordability and tight lending conditions is increasingly biting. It now looks more likely than not that house prices will suffer double-digit falls both this year and in 2009.

'Clearly, a sharp housing-market correction would add to the already serious risks to economic growth, particularly through weighing down on consumer spending.'