The average value of a home inched ahead by just 1.1 per cent in the year to the end of March, its lowest rate since March 1996, according to Nationwide Building Society.

Prices have fallen by 0.6 per cent during the past month to leave the average property costing £179,110, 2.9 per cent less than when prices began their downward trend in November and just £2,027 more than in March last year.

Fionnuala Earley, Nationwide's chief economist, said: "The outlook for UK house prices is clearly more downbeat than at the time of our November forecast.

"Some of the downside risks we identified then have become a reality - most notably the continued turmoil in the financial markets."

The group =expects house prices to end the year up to 4 per cent lower than they started it, although it added a "modest fall" would ensure greater stability in the market going forward.

House prices are coming under pressure from a combination of stretched affordability and the credit crunch.

The trend is hitting first-time buyers particularly hard, as they are being forced to raise larger deposits, with very few 100 per cent mortgages still remaining.

The British Bankers' Association yesterday said the number of mortgages approved during February for people buying a house had fallen by a third compared with the same month of 2007 as people put off moving or struggle to raise the mortgages they need.

Nationwide, which is the UK's second biggest mortgage lender, today raised its mortgage rates by 0.2 per cent for fixed rate deals and by between 0.5 per cent and 0.57 per cent for tracker ones.

Norwich & Peterborough Building Society, which has regularly featured in the mortgage best buy tables, also raised its fixed rates by between 0.20 per cent to 0.25 per cent and its variable ones by up to 0.5 per cent.

The constant increases being made by lenders to their mortgage rates have wiped out the two interest rate cuts made by the Bank of England in December and February, increasing the pressure on the Monetary Policy Committee to reduce rates again.