According to Nationwide Building Society, UK house prices fell in April from a year earlier, the first such decline since 1996, after the credit squeeze dried up finance for property purchases.

Nationwide Building Society said that home values dropped 1% to GBP 178,555 from a year earlier. Its index is one of the measures used by the Bank of England when assessing the housing market. From March, prices fell by 1.1%double the pace economists had forecast.

Nationwide’s report is the latest to suggest a downturn in the UK housing market is worsening. HBOS Plc, the country’s largest mortgage lender said this month that prices fell in March by the most since 1992. The Bank of England said that mortgage approvals dropped to 64,000 last month, the lowest since records began in 1999.

Policy maker Mr David Blanchflower said that mortgage lenders approved the fewest new loans since at least 1999 last month after turmoil in credit markets prompted banks to tighten standards for borrowers. While the Bank of England has cut interest rates to stave off a recession, house prices may fall by a third and a report today showed consumer confidence fell to the lowest since 1992. Mr Blanchflower said that house prices may drop by a third in the next three years and urged his colleagues on the Monetary Policy Committee to take aggressive action on rates. He said that “Monetary policy, in my view, still remains restrictive currently and we need to take action to loosen policy sooner rather than later.”

Ms Fionnuala Earley Nationwide chief economist in a Bloomberg Television interview said that “We’ve been expecting some moderate fall in house prices this year and that’s only to be expected since we’re seeing deteriorating affordability and tighter credit market conditions.” She forecasts that prices may decline as much as 5% this year.