House prices are set to fall by 6 per cent over the next two years, according to a report from Capital Economics, a leading consultancy.

Britain will follow the United States, Ireland, Spain and France by suffering from the end of the global housing boom, it said. Its report forecasts a gloomier scenario than was encountered during the slowdown of 2004 and 2005, when property inflation slowed from 20 per cent to 2 per cent.

Ed Stansfield, who wrote the report, said that average house prices were likely to fall 3 per cent in 2008 and 2009. Last week Halifax announced the first fall in house prices this year.

Mr Stansfield said that affordability had worsened over the past two years, and that problems in the credit market would make it more difficult for people to remortgage.

The report found that monthly repayments on a new mortgage for a typical homeowner were 16 per cent higher than two years ago. The City’s liquidity crisis meant that mortgages would become more expensive, particularly for people with less equity. “Lenders are increasingly differentiating between lower and higher-risk borrowers in terms of the mortgage rates on offer,” it said.