The Nationwide has called for further quantitative easing after property prices slumped 0.7% this month, continuing the price falls that started in the summer.
The three-month on three-month rate of decline accelerated to 1.5%, as the average house price fell from £164,381 to £166,757 in October.
This is the largest fall over three months since April 2009, but far short of the 5 to 6% falls each month during the price crash.
"If the downward trend continues into December, annual inflation would drop to between 0% and -1% by the end of 2010. This compares to a rate of +5.9% at the end of 2009," said the economist.
Nationwide chief economist Martin Gahbauer said the case was growing for more quantitative easing for the boost it could give the housing market, after the October minutes of the Monetary Policy Committee (MPC) showed the issue was back on the table.
Gahbauer said quantitative easing cuts the cost of government borrowing and has the knock-on effect of lowering the cost of fixed rate loans.
In fact, the price of two-year fixed rates mortgages has already tumbled this year as markets anticipated further quantitative easing, he said.
Further easing, or investment in bank debt or mortgage-backed securities would inject liquidity by improving wholesale funding conditions, explained Gahbauer, making it easier for banks to pay down debt and encourage investors to move cash into property as inflation rises.
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