British house prices fell 1.7 per cent on the month in July and at the fastest annual rate since at least 1991, the Nationwide building society said today, in a further sign the housing market is cooling fast.
Nationwide said the average house price fell for a ninth straight month in July to £169,316 - nine percent below the peak hit in October last year of £186,044 and the lowest level since August 2006.
House prices were down 8.1 per cent compared to the same month a year ago - the biggest annual fall since the monthly series began in January 1991.
"The weakening economy and poor housing market sentiment do not suggest that the market will recover quickly," said Fionnuala Earley, Nationwide chief economist.
"The risk of an economic recession in the UK is now clearly rising."
The weaker than expected figures are likely to fuel speculation that the next move in official interest rates will be down, given growing fears of a recession.
However, Bank of England policymakers have indicated they are in no hurry to cut rates when inflation is running at its highest level in more than a decade - 3.8 per cent.
Gas and electricity suppliers are also starting to ramp up prices, which could drive inflation even further above from the central bank's 2 per cent target.
Britain's biggest supplier and British Gas-owner Centrica said last night it would hike gas prices by 35 per cent and rival EDF last week said it was raising prices for gas and electricity by about a fifth.
Alongside concerns about sharp price increases, recent news on the economy has been almost unequivocally bleak.
Mortgage approvals, which provide an insight into future moves in house prices, fell sharply to a fresh series low in June, according to Bank of England data this week.
Consumer confidence is at a record low, retail spending is weakening sharply, unemployment is rising and some broader surveys are already indicating the economy is in contraction.
"With poor economic news, the sentiment around interest rates has become much less hawkish," said Ms Earley. "Only a month ago the market was expecting the Monetary Policy Committee to increase the Bank Rate twice this year: they now expect no change."