House price growth slowed further in May, government figures showed yesterday, reinforcing widespread evidence that a sharp housing market downturn is underway.

The lagging survey from the Department of Communities and Local Government, which gauges prices when mortgage loans are made, said house prices were 3.7 per cent higher on a year ago in May, down from a 4.9 per cent rise in April.

Prices were 0.3 per cent lower on the month, taking the average house price down to £218,151.

"Severe downward pressure on house prices continues to come from very weak housing market activity, elevated affordability pressures on potential house buyers and very tight credit conditions," said Howard Archer, an economist at Global Insight.

The figures are likely to add to pressure on the Bank of England to cut interest rates to boost a broadly flagging economy, although rising inflation probably means that rates will have to stay on hold for some months to come.

Other less-backward looking surveys are reporting ever sharper declines in house prices, raising concerns over a housing market crash after a decade in which prices trebled.

The credit crunch has made it harder to get funding for a home while higher living costs and muted wage growth are conspiring to squeeze first-time buyers out of the market. Last week, the Nationwide building society reported a 6.3 per cent annual decline in house prices last month - the weakest showing since December 1992 and more than seven per cent below the peak hit late last year.

Anecdotal evidence also shows conditions in the market are getting bleaker. One of the biggest house builders, Persimmon, said yesterday it had sold almost a third less houses in the first half of this year than last year.