Fears of a housing slowdown on a scale not seen since the early 1990s were fuelled after shock figures showed prices tumbling by a record 2.5% in May.
The fall wipes nearly £5,000 off the price of the average house and is the biggest monthly fall ever seen in the 17-year history of the Nationwide building society's index.
The average house now costs 4.4% less than a year ago - £173,583 - representing the biggest annual decline since December 1992. Prices have fallen for seven successive months - also the worse run since 1992.
Some experts predict house prices could fall as much as 20% by the end of next year. Most City economists had been predicting a fall of just 0.5% over the month.
Capital Economics economist Seema Shah said: "The plunge in house prices in May is a reminder of just how fast house prices can decline. The sheer size of the drop in house prices, without the economy having yet slowed significantly, suggests that this housing market correction will be deep and prolonged."
Howard Archer, chief UK and European economist with Global Insight added that double-digit falls this year and next were "more likely than not".
Would-be borrowers have been struggling to find cheap mortgage deals from cautious lenders, while gloomy data from the Bank of England and the Royal Institution of Chartered Surveyors had also hit market confidence, Nationwide said.
Chief economist Fionnuala Earley said: "The pace of house price falls accelerated in May as more weak economic news added to the gathering momentum of negative sentiment about the housing market."
Meanwhile scope for interest rate cuts from Bank of England policymakers to give some help to the property market is severely limited despite the steep falls, as rocketing oil and food costs spark inflation concerns.
Read More
Bank policymakers gather for their next rate-setting meeting on Wednesday, but the official measure of inflation hit 3% in April - a full 1% above the Bank's target - and is set to soar further still this year.
