The Bank of England reports that the number of mortgages approved by lenders fell from 33,000 in July to 32,000 in August - 75% below their peak. According to Capital Economics, this level of lending suggests house prices will fall by 25% a year as a lack of credit freezes the market.

However, it is also likely that the low level of activity in August partly reflects uncertainty about stamp duty, with potential buyers waiting to see what action the Government would take. In September, Gordon Brown announced that the nil-band for stamp duty would be increased from £125,000 to £175,000 for one year only.

In this ever changing market trying to predict property prices in the UK in the short term is futile. The Council of Mortgage Lenders has admitted that its May forecast of a 7% fall this year is wide of the mark and says it does not expect the market to recover from its current slump before 2010.

It is now abandoning attempts to predict house price movements because of the uncertainties that surround the market. Its members account for 98% of residential mortgages in the UK

Market forecasting is problematic at the best of times but, in the aftermath of all the recent uncertainty, trying to predict accurately how the housing market will perform in the coming months is even more difficult than usual. For example try and do the free valuation here and you will see that the quote you get is way too optimistic. You will need to devalue it by at least 10%.

Some would have based their recent forecast in May/June/July on an assumption that the Bank of England's special liquidity scheme would begin to have some modest beneficial effects on the availability of mortgage credit in the second half of this year. And in the late summer, there were tentative signs of an improvement in conditions, with a fall in mortgage rates for mainstream, lower risk customers.

But the current financial market turmoil has sparked another surge in inter-bank lending rates and three month rates, to which some tracker mortgages are linked, have risen.

'Looking ahead, mortgage approvals data remains extremely frail, and the number of future house purchases will be affected by consumer sentiment and the outlook for property prices,' the spokesman added.

Generally current market forecasts have understated the extent of the house price correction and the thinking is that it is futile to update them at this stage of the year.

There is now broad agreement throughout the industry that property prices in the UK are likely to fall by 20% during 2008 and 2009 with Nationwide predicting they could be as high as 25%. So if you bought in the last two years, then it would take another two years to just catch up. You would be ok if you are letting it and have sufficient funds to support any differential in money in and out.