Falling house prices, declining consumer confidence, bank writedowns and spiralling energy costs are combining to create a grim economic picture.

The latest survey from the Nationwide Building Society showed house prices falling at a record rate – losing 8.1 per cent of their value during the past year.

Nationwide said the slide was the fastest annual rate of decline since it launched its index in January 1991.

It added that prices fell for the ninth month in a row during July, dropping by a further 1.7 per cent – more than double the 0.8 per cent drop seen in June.

The gloomy figures came as market research organisation GfK NOP said its consumer confidence index dived to a record low during the month, as people worried about the outlook for the economy and their own financial situation.

The group’s main index slumped to minus 39 in July, the lowest level recorded since the survey began in 1974 and below the levels seen during the 1990s recession.

Nationwide said the average home in the UK now costs £169,316, nearly £15,000 less than this time last year and the lowest since August 2006. But it added that, on average, prices were still nearly £11,000 higher than they were three years ago.

The figures will do little to improve economists’ sentiment about the housing market, with their consensus now showing house price falls of between 15 per cent and 20 per cent during 2008 and 2009, according to lender Halifax Bank of Scotland.

HBOS was the focus of attention itself yesterday as it revealed sharply lower profits and said it was concerned about rising bad debts as customers struggle with repayments.

HBOS – owner of Britain’s biggest mortgage lender Halifax – said pre-tax profits in the first six months of the year plummeted 72 per cent to £848 million.

The news came only a day after fellow top five bank Lloyds TSB posted a 70 per cent decline in interim profits after suffering amid the credit crunch and stock market volatility.

Stripping out changes to asset valuations, HBOS pre-tax profits fell 51 per cent to £1.45 billion in the first half. But the plunge in profits was not as bad as the market had expected.

The bank said it suffered a £1.1 billion hit on investments hurt by the credit market turmoil, although this was only marginally up on the £1.03 billion already reported in May.

However, it saw a 36 per cent leap in bad debt charges to £1.31 billion, which it said could rise further as hard-pressed customers struggle with repayments and falling house prices.

Increasing energy costs may also have a bearing on the situation.

British Gas parent company Centrica posted half-year profits of £992 million, a day after hitting millions of customers with a record hike in gas bills.

The operating profits were 19 per cent below last year after the group felt the impact of rising wholesale costs at British Gas, where profits fell 69 per cent to £166 million.

The UK’s biggest domestic energy supplier, which has 15.9 million customers, has upped gas bills by a mammoth 35 per cent, with electricity prices up nine per cent.

The group said the price increases were necessary to restore “reasonable profitability” to British Gas and invest in additional gas and power assets.

But while British Gas earnings were down more than two-thirds from last year’s £533 million – when Centrica waited before passing on rapidly falling wholesale prices – the firm’s production business saw a five-fold jump in profits.