House prices fell 1.9 percent in August, registering the biggest year on year falls recorded in the UK since 1991. Nationwide said the typical house price fell 1.9 percent in the month, taking the annual fall to 10.5 percent.

This is the first time a year on year decline in prices has entered double digits since the lender began collecting monthly data in 1991. The figures helped push sterling to a near record low against the euro as the outlook for the housing market continued to deteriorate.

Nationwide’s findings are in agreement with rival lender Halifax; showing prices fell nearly 11 percent in the year to July. This follows a week of bleak earnings reports from the UK housebuilding sector.

The speed of the decline in house prices has taken analysts by surprise, and contributed to the sluggish state of the market as buyers and sellers struggle to predict where prices will eventually settle.

Ian Stannard at BNP Paribas said: “We have been forecasting three quarters of negative growth in the UK, but we could now be looking at a full year. It wouldn’t take much more.”

Nationwide’s index shows house prices started falling last November, with the average price falling from a peak of £186,044 to £164,654 this month.

Nationwide’s chief economist, Fionnuala Earley, said that even if the Bank of England was to cut interest rates, to what extent this would “revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low.”

The monetary policy committee has kept interest rates at 5 percent since April, and appears keen to keep its options open as it weighs the risks of recession against those of persistently high inflation.

However, markets have priced in a strong chance of a cut rate by the end of the year, and Ms Earley noted that this had started to bring down fixed mortgage rates.

Nationwide said more borrowers were now opting for long-term fixed rate deals, even though they had been more expensive than trackers. This suggests that people are nervous of being caught out by an unexpected rate rise, or by difficulties refinancing later.