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The price of a typical house fell by 1.9% in August according to the Nationwide.

This means that house prices are 10.5% down year on year, the building society said. The average home now costs £164,654 which is more than £19,000 cheaper than in the same month last year.

Commenting on the figures Fionnuala Earley, Nationwide’s chief economist, said: “The price of a typical house fell by 1.9% in August, bringing the annual fall into double digits for the first time since the fourth quarter of 1990. The price of a typical house fell by 10.5% over the last twelve months to £164,654. While the pace of monthly falls picked up during the month, the less volatile three month on three month measure, eased very slightly in August to 4.5% from 4.6% in July.

“Estate agents’ data across all property types is a little more optimistic and suggests that there may be some glimmers of interest returning to the market. Agents report an improvement in new buyer enquiries, perhaps stimulated by the recent falls in prices and the opportunity to negotiate a good deal. However, the reported numbers of sales have not been encouraging.

“There is clearly less mortgage borrowing taking place in the current market, but those borrowers choosing a new loan are tending to opt for fixed rate loans, even though they have been more expensive than trackers.

“The August Inflation Report struck a markedly more dovish tone than in May, even though inflation is at its highest level since 1992 and at more than twice its official target. There is still a great deal of uncertainty, but the Bank of England’s forecasts of growth and inflation have been widely interpreted as opening the door to rate cuts.

“Market rates have reacted to this and as a consequence mortgage rates, particularly fixed rates, have continued to come down. We expect the next move in the Bank Rate to be down, but the extent to which this will revive the mortgage and housing market is likely to be limited while overall confidence in economic and housing market conditions is low.”

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The UK’s annual rate of inflation rose to 4.4% in July, up from 3.8% in June and more than twice the government’s 2% target, official figures have shown.

The rise in the Consumer Prices Index (CPI) was more than expected, with food prices up a record 13.7% on the year.

High petrol prices also helped to push up inflation as the data was collected before the recent drop in oil prices.

Inflation as measured by the Retail Prices Index (RPI) - often used in pay negotiations - rose to 5% from 4.6%.

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The Bank of England’s Monetary Policy Committee opted to leave rates unchanged after weighing up the twin threat of rising inflation and the sharp slowdown in the British economy, which is increasingly at risk of sliding into recession.

The decision to hold rates was widely expected by economists, who argue that a rate hike would have sent the struggling economy into a deep downturn, while a cut would indicate that the Bank is less worried about inflation, even though it stands at 3.8pc, way ahead of its 2pc target.

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House price slump continued in July according to the latest monthly report from the Halifax.

The lender said prices fell another 1.7% last month, taking the annual rate of decline down from 6.1% to 8.8%.

The Halifax calculates that the average house in the UK is now worth £177,351, back to the value seen in June 2006.

The bank said demand from home buyers had been “significantly curbed” by the lack of mortgage funds, high prices and the squeeze on household finances.

“Pressure on householders’ income, together with a very significant reduction in mortgage finance due to the global financial markets crisis, is constraining potential house buyers’ ability to enter the market,” said the Halifax’s economist Suren Thiru.

“This is resulting in both lower prices and activity levels,” he added.

The Halifax’s survey chimes with that of rival mortgage lender Nationwide, which recently calculated that UK property prices had fallen by 8.1% in the year to July.