House prices drop by record 15.9pc

But a Black Country estate agent today estimated that in the West Midlands, the figure could be nearer 20 per cent. It comes as a report also shows that lenders are demanding a deposit of at least 40 per cent for a quarter of all mortgages.

Matthew Moore, a partner at Edwards Moore estate agents, in Anchor Road, Aldridge, Walsall, said house prices were currently at the same levels as in August 2004.

He estimated the average house price in Walsall was around £150,000 to £160,000, compared to around £175,000 a year ago.

"Buyers are very few and far between at the moment," said Mr Moore.

"The market has got to improve so that the number of transactions will improve. But it is impossible to say when that will happen. At the moment mortgage lenders are making it very difficult to borrow."

He added: "The fact that nobody is building at the moment does mean there will eventually be a very high demand but a very low supply."

The average house price in Walsall is around seven times the average annual wage, which is currently £18,500.

"It is thought as many as 750,000 potential buyers have been locked out of the housing market between 2003 and 2007.

But this build-up in demand means house prices could recover quickly when the market does become active again.

Fionnuala Earley, Nationwide Building Society's chief economist, said: "The short-term outlook for the housing market is fairly weak.

"This should not be surprising given the economic and labour market conditions we expect to face."

Meanwhile, extended help for homeowners struggling to pay mortgages after losing their jobs was introduced by the Government yesterday in a bid to slow spiralling repossessions.