Fears that the already severe slump in the housing market will mutate into a full-blown crash intensified yesterday as a key survey showed house prices plunging at their fastest annual rate since the end of the last recession.

The value of an average home tumbled by another 0.9 per cent last month, on the heels of a record 2.5 per cent fall in May, to stand 6.3 per cent down on levels a year ago - the steepest year-on-year decline since December 1992, according to the latest survey from Nationwide Building Society.

The housing downturn has already wiped 7.3 per cent, or £13,500, off the price of the average house since the market peaked last October, with prices tumbling by 6.4 per cent since January.

Although June's price fall marked a much smaller drop in prices than in May, economists said this offered little reassurance and predicted that a more severe slide in prices was to come as a drought in mortgage lending took a toll of housing market activity.

The pace of price falls almost doubled in the second quarter, with average home values dropping by 3.7 per cent between April and June, compared with a 2 per cent fall in the previous three months, based on Nationwide's figures.

Alan Clarke, of BNP Paribas, said: “There is virtually no light at the end of the tunnel for the housing market. Plenty more downside is likely.”

Howard Archer, of Global Insight agreed. He said: “This is hardly the most reassuring of news, and does little to dilute concerns that we are headed for a sharp correction in house prices.”

Economists have scrambled to forecast an even more severe correction in house prices than previously expected after dire figures from the Bank of England this week showed that the number of new home loans agreed plunged to record lows in May.

Prices are under severe pressures as the scarcity and increased cost of mortgages combines with expectations of future price falls to leave ever fewer properties changing hands.

Some economists expect prices to slump by between 15 and 20 per cent this year, and continue to drop until at least 2010.

Money Central: the latest house price forecasts, region by region