UK house prices fell at their sharpest annual rate in at least 25 years in September, as some mortgage lenders were yesterday preparing to withdraw a number of their most competitive deals from the market in response to the central interest rate cut.

UK house prices fell at their sharpest annual rate in at least 25 years in September, as some mortgage lenders were yesterday preparing to withdraw a number of their most competitive deals from the market in response to the central interest rate cut.

HBOS Plc - the biggest mortgage lender in the country - said its Halifax house price index fell 1.3% in September, taking prices down 12.4% in the three months to September compared with a year ago, the sharpest fall since records began in 1983.

The year-on-year decline for September alone was 13.3%, also a quarter-century record. The figures reflect the UK-wide picture, and a breakdown of quarterly Scottish figures will be available within the next three weeks.

Analysts said that although the Bank of England's emergency cut would provide some relief to homeowners, house prices still had further to fall as lending conditions were still tight.

Yesterday, Cheltenham and Gloucester, the home-loans arm of Lloyds TSB, withdrew a number of "tracker" deals - where interest payments follow the central bank rate - following the announcement of the 0.5% drop.

Nationwide said yesterday that it was "reviewing" the market and changes in its products were likely, and a spokeswoman for Abbey, the second-largest lender in the UK, also said that a review of its products was under way.

An Abbey spokeswoman said: "Following the news that the Bank of England will be lowering the base rate by 0.5 per cent, Abbey is reviewing its mortgage and savings rates and an announcement will be made in due course." The level of change in the mortgage market will largely rest on whether a significant cut in the Libor rate - the terms at which banks lend to each other - is made.

Seema Shah, property economist at Capital Economics, said homeowners would feel a limited effect from the £50bn rescue package for banks announced earlier this week.

She said: "We suspect that this will not change the outlook for house prices. After all, the UK economy is still on course for a two-year contraction, buyer confidence is muted, house prices remain overvalued, and lenders are likely to remain cautious."

Howard Archer, economist at Global Insight, added that homeowners could expect property values to fall further as the financial markets go into recovery.

He said: "House prices seem poised to fall substantially further as the fundamentals remain largely negative."