MercoPress. South Atlantic News Agency

Britain's house prices fell a record 15.9% during 2008

Britain's biggest building society has said house prices fell by a record 15.9% during 2008 as it warned the property market was in for another turbulent year. Nationwide said prices were likely to have further to fall before significant numbers of buyers returned to the market, although it stopped short of making a specific forecast for price drops in 2009.

The group said the average cost of a UK home fell by a further 2.5% in December, dashing hopes that November's 0.4% slide marked a stabilisation in the rate at which prices were dropping. The fall during 2008, which is the biggest since the group began collecting data in this format in 1991, left the average house price at £153,048 - wiping out all gains seen since the spring of 2005 and leaving homes costing £20,000 less than in December last year. Nationwide's figures are in line with statistics reported by Britain's biggest mortgage lender, Halifax, at the end of last week, which showed that house prices had fallen by 16.2% during the final quarter of 2008 compared with the same period of 2007, after losing 2.2% of their value in December. Fionnuala Earley, Nationwide's chief economist, said: "2008 has been a year of turmoil in the UK housing market. The disruption in the financial markets worsened throughout 2008 and had larger implications for the real economy than we anticipated a year ago. Conditions remain highly volatile going into 2009, making it more difficult than usual to arrive at a specific forecast for house prices." The housing market is being strangled by the credit crunch, with the mortgage drought exacerbating already stretched affordability. One in four mortgages now require a deposit of at least 40%, while 60% of mortgages are only available to people looking to borrow 75% of their home's value or less. The high deposits being demanded by lenders are making it difficult for people to buy their first home or trade up the ladder, while the higher rates charged to borrowers who do not have a sizeable deposit are off-setting the improvements in affordability caused by house price falls. The number of mortgages approved for house purchase sunk to a new record low of just 27,000 during November, according to figures from the Bank of England, while housing transactions are running at less than half the levels seen during 2007.