House prices in the West Midlands plunged by five per cent in the first quarter of 2008.

The recorded fall between January and March was the biggest anywhere in the UK, according to Britain’s biggest mortgage lender Halifax.

The West Midlands also recorded the biggest annual drop in house prices in England, with prices down 3.7 per cent in the past 12 months.

Nationwide, prices fell 2.5 per cent in March, their biggest monthly fall since the 1990s house price crash.

Martin Ellis, Halifax chief economist, said: “This fall is continuing the pattern whereby the market is readjusting. Sellers are having to adjust the price they ask for their properties.”

But he said the group still expected there to be only a “modest fall” in house prices for the whole of 2008.

In the West Midlands, house prices have increased by 150 per cent in the past 10 years.

Mr Ellis said: “Sound economic fundamentals are supporting house prices. A strong labour market, low interest rates and a shortage of new houses underpin housing valuations. Our research shows that the labour market is the key driver of the housing market.”