House prices fell by 1.7 per cent in July, which has brought the annual house price fall to 8.1 per cent. According to Nationwide, the typical house is worth £15,000 less than it was this time last year.
"The average price is now £169,316, almost £15,000 less than this time last year and its lowest level since August 2006," said Fionnuala Earley, Nationwide's Chief Economist, "house prices have now been falling for nine consecutive months."
And a report by Standard and Poor's
says that prices will continue to drop, predicting that the housing market slump will wipe £50,000 off the average house plunging many homeowners into negative equity.
The credit agency says that 70,000 mortgage holders currently owe more than their homes are worth, and predicts that by next April, the figure will be 1.7million.
But the falling prices have not helped first time buyers who are still struggling to get a mortgage
in order to take their first step on the housing ladder; house purchase transactions fell to 36,000 in June, a third of the level they were this time last year.
According to Nationwide, there are around 42 per cent less first time buyers now than there were last year, and Ms Earley says this could be down to a number of factors.
"This may be due to their own desire to delay purchase because they expect prices to continue to fall, or frustration in obtaining finance," she said.
"Difficulties with credit availability are likely to have had some effect, particularly at the higher end of the loan-to-value range (LTV). Indeed the proportion of high loan to value mortgages
has come down disproportionately in the last year."
The fact that first time purchases are down is likely to be one of the reasons why the buy to let market is so stable. Buy to let mortgage
specialist, Paragon Mortgages has released figures that show that average UK rents are 9.3 per cent higher than a year ago.
Despite the doom and gloom, Ms Earley suggests there might be light at the end of the tunnel but warns "it is unlikely to happen overnight".
"As the cost of mortgages begins to come down, activity could be bolstered and restore some liquidity to the housing market, she said.
"Overall the weakening economy and poor housing market sentiment do not suggest that the market will recover quickly. But, if oil prices continue to fall and the MPC is satisfied that its inflation credentials are intact, the possibility of earlier rapid cuts in interest rates increases, which would be good news for borrowers."