HOUSE prices plunged by 16.2% during 2008 in the biggest drop for a calendar year on record, Halifax said last night.

Last year’s price plummet, which came after the average value of a property in the UK fell 2.2% in December, was the biggest annual fall since the Halifax began recording data in 1983.

Britain’s biggest mortgage lender said the typical price of a property now stands at £159,896 – back to August 2004 levels.

The drop in annual house price inflation measures prices in the previous three months compared with the same period a year ago.

But if house prices in December are compared with prices in December 2007, the fall is even more dramatic at 18.9%.

And Halifax warned that the property market will come under further pressure in 2009 as the financial crisis continues to restrict lending in the UK.

Newly-released Bank of England figures revealed that just 27,000 mortgages were approved for new house purchases during November, which was a new record low.

The Bank also said in its credit report that banks and building societies plan to cut back further on lending as the economic outlook worsens.

However, the Halifax offered hope that the property downturn could be limited as housing affordability improves.