Figures from the lender showed that house values are now 1.4 per cent lower year on year, with the average house price sitting at £163,964.
Robert Gardner, chief economist at Nationwide, said this morning that the Funding for Lending scheme should bolster the housing market in months to come.
He said: “However, labour market developments will remain of paramount importance in deciding the trajectory of house prices.”
The latest jobless data showed that UK unemployment fell by 7,000 to 2.59m in the three months to July compared with the previous quarter.
A “gradual recovery” of the economy over the next 12 months means house prices will remain “relatively flat or declining only modestly” over the same period, Gardner added.