BIGGEST HOUSE PRICE FALL FOR 18 YEARS; 10.5% DROP IN VALUES IN THE LAST YEAR pounds 20k WIPED OFF PRICE OF AVERAGE PROPERTY 300k HOME OWNERS NOW IN NEGATIVE EQUITY.

Byline: BY GRAHAM HISCOTT DEPUTY BUSINESS EDITOR

THE average house is worth pounds 20,000 less than last summer - the fastest fall in 18 years, figures out yesterday show.

Prices of homes have dropped 10.5 per cent in 12 months, according to the Nationwide Building Society.

And as buyers sit it out waiting for cheaper deals, prices are sliding quicker than at any time since 1990 when Britain was in the grip of a recession. The sharp drop has left as many as 300,000 owners in negative equity, with their property worth less than their mortgage debt.

Some experts predict that could top 1.7 million if price falls continue.

Nationwide's research shows the average house price has fallen to pounds 164,654 from pounds 183,898 last August. It peaked at pounds 186,044 in October.

Prices have been falling for 10 months in a row, dropping another 1.9 per cent between July and August. This month they were going down at a rate of more than pounds 150 a day.

Nationwide's chief economist Fionnuala Earley said market activity had been "very subdued" but data from estate agents suggested some "glimmers of interest" returning as buyers snapped up opportunities.

Also she said mortgage deals had improved in the expectation of the Bank of England lowering rates.

But the Nationwide's figures coincided with more grim news about the economy. A CBI report showed the High Street is experiencing its worst trade in 25 years with stores having suffer a "summer to forget".

And leading City forecaster Capital Economics predicted Britain will plunge into a recession next year.

The credit crunch has made debtladen banks slash their lending and raise borrowing costs, This has hit customers at the same time as soaring household bills.

So Capital Economics reckons house prices will drop another 24 per cent this year. Spokesman Kelvin Davidson said: "The economy is looking pretty bad and there is no end in sight to the reduction in mortgage credit."

But others are optimistic. Mortgage expert Ray Boulger said: "There are signs that an increasing number of people are sniffing around for loans."

A Communities and Local Government spokesman said: "This is largely about the supply of credit. But in the 90s it was about high interest rates and job losses.

"The fundamentals of the market are sound, with long-term demand for housing and low unemployment."

The National Housing Federation's David Orr said: "House prices have soared 170 per cent in the last decade. The average house still costs nine times average incomes."

LibDem Treasury spokesman Vince Cable slammed the Government on housing. He said: "Rather than dithering over crackpot schemes to prop up the market, the Government must act to help the thousands in danger of losing their homes."

Shadow chancellor George Osborne said: "They should take first-time buyers out of stamp duty."

THE WAY PRICES WERE IN 1990..

House: pounds 70,243

Salary: pounds 13,760

Loaf: 50p

Pint of milk: 32p

Dozen eggs: pounds 1.21

Bag of sugar: 63p

Pint of beer: pounds 1.14

20 cigarettes: pounds 1.69

Litre of petrol: 45p

Wedding: pounds 7,640

CAPTION(S):

FALL IN HOUSE PRICES; AVERAGE UK HOUSE PRICE; LONG TERM REAL HOUSE PRICE TREND