Homeowners across Northern Ireland have been hit by a double blow as it emerged house prices plunged by 16%, and a leading building society announced it will not pass on any further cuts in interest rates to tracker mortgage customers.

According to the Halifax, house prices dropped by 16.2% during 2008 in the biggest drop for a calendar year on record.

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.

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

In a second blow to households, the Nationwide Building Society said yesterday it will not pass on any further cuts in UK interest rates to most of its tracker mortgage customers.

The decision will affect about a quarter of a million of Nationwide's 1.5 million mortgage customers across the UK.

A clause in the contracts of 250,000 customers says the Nationwide does not have to lower its rates when the Bank of England's rate falls below 2.75%. While it did not enforce this when the rate fell to 2% in December, it now says rates will fall no further.

It says it is doing this to protect savers from sharp rate cuts.

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.

Campbell Morris from Morris Estate Agents Ltd in north Belfast, a member of the National Association of Estate Agents (NAEA), said “erratic pricing” is the biggest problem in selling property.

“The biggest impediment to an increase in transactions — which is what is required in Northern Ireland — is consistent pricing,” he said. “There are still very erratic pricing for similar properties.

“It is first time buyers that need to underpin the stability of the market, that’s why we had such a fantastic spike upwards and a traumatic spike downwards because the increase in the market was very investor driven.”

There was also a sharp fall in the number of new mortgages in the pipeline for people remortgaging, with these diving from 72,000 in October to just 42,000 in November, while there was also a slight fall in approvals for equity release and buy-to-let loans.

Mr Morris said: “Once mortgages are made readily available I don’t see why we shouldn’t have a steady positive progression towards market normality.

“I think while bank lending is punitive at the moment, banks only make money from lending money so in the long term they will have to look at their position and what’s on mortgage books.”