Nationwide's measure of house prices has suffered its first annual fall in 12 years and the pace of monthly decline is increasing, Britain's largest building society reported today. The last time house prices fell year-on-year was March 1996.

Prices are now 1 per cent lower than this time last year, taking £1,759 off the average price of a home in Britain, which is now £178,555.

On a monthly basis, the average price of a home fell by 1.1 per cent in April, twice as severe as economists had expected. That ratcheted up the pace of decline and represented the sixth consecutive monthly drop in prices. The average price in March was down 0.7 per cent, the figures showed.

A polling of 30 economists by Reuters had forecast house prices to fall in April on average by 0.5 per cent.

The monthly drop has only been matched over the past year by the declines in October and November. The pace of decline slowed marginally during December and January but since February has picked up.

Fionnuala Earley, chief economist at Nationwide, poured cold water on hopes voiced by the Chancellor last week that the Bank of England's £50 billion injection of capital into the banking sector would loosen the mortgage market.

Ms Earley said: "The scheme is unlikely to mean that house prices and mortgage lending will return to levels seen at this time last year. Weakening housing sentiment and demand, unrelated to the financial turmoil, will mean that we should expect slower market conditions."

Homeowners and househunters have been hit by a triple whammy of tightened lending criteria, withdrawal of mortgage products and a jump in monthly repayments as thousands come off cheap deals.

The Council of Mortgage Lenders estimates that 1.4 million borrowers will be coming off cheap fixed rate deals this year.

Ms Earley said: "We estimate that a further 400,000 borrowers will come to the end of tracker or discount deals over the whole of 2008, and these borrowers may also face a fairly significant payment shock."

Howard Archer, chief economist at Global Insight, said that he could not rule out mortgage lending remaining depressed until the middle of next year.

He said: "Banks need sufficient funds for responsible lending but the days of 100 per cent loan-to-value lending are definitely gone. I would be surprised if lending picks up suddenly — my view is it will remain depressed for an extended period."