And signs of worsening conditions will do little to help struggling Prime Minister Gordon Brown who has lost the public's confidence on the economy in the wake of the collapse of credit crunch victim and mortgage lender Northern Rock.
Two thirds of Britons own their homes, putting millions at risk of negative equity - when the house value falls below its mortgage - if house prices crumble. However, that may be a way off yet, given that prices trebled over the last decade.
TOUGH TIMES
While soaring commodity prices across the globe have forced inflation to the top of the political agenda and convinced financial markets that interest rates are heading higher, most economists expect rates will eventually have to fall.
Even hawkish Bank policymaker Andrew Sentance said this week he expected slowing growth to help cool price pressures, suggesting the central bank is in no hurry to raise rates.
But lower borrowing costs are unlikely to come in time to help anyone in Britain looking to buy a home.
Despite three cuts in official interest rates to 5 percent since December, banks have actually been raising rates on their mortgage deals because the credit crunch has made it harder for them to get hold of cheap funding on financial markets.
The amounts that banks have already lent to customers is also starting to come off the boil, with mortgage lending rising by 4.0 billion in May, down from a 5.2 billion pound increase in April and the weakest rise since October 2007.
"With no evidence that the mortgage credit squeeze is easing, affordability still poor, unemployment now rising and falling house prices likely to dent buyer confidence further, it is hard to avoid the conclusion that the housing market correction will be deep and prolonged," said Ed Stansfield, a property economist at consultancy Capital Economics.
