Nationwide says price of typical house is 1% lower than in April 2007

UK house prices have recorded their first annual fall for 12 years, according to the Nationwide.

The price of a typical house is now 1% lower than in April 2007, according to the building society, the first year-on-year fall in house prices since March 1996.

House prices declined by 1.1% in April, the sixth monthly fall in a row. The average home now costs £178,555, which is £1,759 less than this time last year.

Fionnuala Earley, Nationwide’s chief economist, said: “April was another difficult month for the housing market. The fall in prices continues the trend of the last six months and reflects the weakening sentiment in the market brought about by poor affordability and tighter financial market conditions.”

Meanwhile, a senior Bank of England official has warned that house prices could drop 30% over the next few years if interest rates are not cut.

David Blanchflower, a member of the Monetary Policy Committee which sets interest rates in the UK, said: "In my view a correction of approximately one third in house prices does not seem implausible in the UK over a period of two or three years… Cutting interest rates now may help to prevent such a dramatic fall."”

However, Blanchflower said that such a drop could make the housing market more “sustainable” in the long run.