LONDON (ShareCast) - House prices fell by their biggest ever annual rate in July, according to the UK’s largest building society, down 8.1% on the same time in 2007.

They tumbled 1.7% during the month, more than double the 0.8% drop reported in June. The annual decline, about £15,000, was the worst since Nationwide began its survey in 1991.

The mortgage lender’s chief economist Fionnuala Earley said the average property is now £17,000 cheaper than it was at last October’s peak and sits at its lowest in nearly two years.

"House prices have now been falling for nine consecutive months, but on average are still almost £11,000 higher than three years ago,” she added.

Yesterday, a report from credit ratings agency Standard & Poor's warned that a 17% fall in house prices by the end of next year will put 1.7m households, or 14% of borrowers, into negative equity.

It said 70,000 of us currently have mortgages worth more than the value of our property, but that could be dwarfed by the potential figure if prices continue to drop.

The figures have forced many to draw comparisons with the property market crash of the early-1990s.

“Overall the weakening economy and poor housing market sentiment do not suggest that the market will recover quickly,” said Earley today.

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