The average cost of a home fell by 2.5% in March, the biggest fall since September 1992, according to new figures.

This represents the second largest drop ever, Halifax said.

And as the credit crunch continues to take its toll on the market, annual house price growth also slowed to just 1.1%, its lowest level for 12 years, which means property prices are now falling in real terms on an annual basis.

Falls in the price of property were even more dramatic regionally, with house prices in the West Midlands seeing a drop of 5% during the first three months of the year, while the average cost of a home in Wales fell by 4.7% and 2.6% in the South West.

Three regions have also seen the annual house price growth turn negative, with prices 5.3% lower in Wales than they were a year earlier, while they have dropped 3.7% in the West Midlands and 3.3% in the South West over the past 12 months.

The housing market has been under increasing pressure in recent months due to a combination of the problems in the mortgage market and stretched affordability following previous strong price growth.

Figures from the Council of Mortgage Lenders also show that the number of mortgages taken out by homebuyers fell for the fourth month in a row during February, hitting a new low.

Just 49,000 home loans were advanced to people buying a property in the month, 30% less than in February last year, and the lowest figure since the group first began to collect data in this format in 2002.

The CML said the February figures related to completions of transactions started several months ago, and warned that the ongoing tightening in lending criteria would lead to further falls in new business going forward.

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