MPC member David Blanchflower warned that a downward correction in house prices could reduce house prices by 33% in the next 2-3 years. He points that the current levels of house prices are fundamentally unaffordable and this could cause a major correction that could last through 2009 to 2010.

The decline in prices has been precipiated by the freezing of the mortgage industry. This has seen a big fall in the number of available products and a decline in mortgage lending. Banks are requiring much bigger than normal deposits. This has made it difficult for first time buyers and even those seeking to upgrade to buy a house.

At the moment, there is no certainty as to how long the problems in the mortgage industry will last. The Bank of England and government are clearly worried. However, the Banks injection of £50billion into the mortgage sector has so far failed to turn around the market. Banks are still increasing interbank lending rates.

Nationwide and Halifax Housing statistics, reporting a 2.5% decline in prices in March. This one of the biggest monthly falls, especially unusual for spring time.