British house prices fell 2% in June, taking them almost 10% below last year's peak, HBOS said today, as a property market market downturn threatens to derail the whole UK economy.

The average house price stood at £180,334 sterling, 8.7% lower than a year ago. Analysts said the fall was steeper even than in the early 1990s recession.

The property market slowdown is now also hitting the wider economy as construction and households goods companies suffer.

Barratt Developments said today that it was cutting 1,200 jobs to cope with the downturn in the housing market, joining a raft of builders taking similar measures.

Figures from Nationwide, a rival lender to HBOS, last week showed British house prices fell 0.9% in June, posting an eighth consecutive monthly decline.