Nationwide reports 12% annual fall overall but points to signs that decline may be slowing

House prices fell by 1.7% during September, the 11th monthly fall in a row, according to the latest data from the Nationwide.

The building society's figures show that prices are now 12.4% lower than a year ago, leaving the average UK home priced just £161,797.

It said market weakness was “not surprising given ongoing turmoil” and that prices would continue to fall in the short term as the credit crunch continues to squeeze mortgage lending.

However, Nationwide pointed to signs that the house price decline is no longer accelerating and said that longer-term prospects for the housing market “are more sound”.

Fionnuala Earley, Nationwide's chief economist, said: “House prices have now fallen for eleven consecutive months, but the monthly rate of fall has been almost unchanged in the last three months.

“The less volatile three-month-on-three month series has also barely changed for the last three months, after accelerating in the first half of the year. This may suggest the beginning of some stabilisation in the pace of house price falls.”

She added: “The long-run trend growth in real house prices in the UK is around 2.7% per annum and there is no reason to expect that over the longer term house prices should

not continue to go up in real terms, even if we are going through a sharp correction now.”