UK house prices are poised to plunge by six per cent within the next two years, it has been claimed.

In a new report released by consultancy firm Capital Economics, analysts predict that the knock-on effects of recent economic instability combined with the financial pressure on the public caused by interest rate rises and increase mortgage payments would have a dramatic impact on the market.

Ed Stansfield, a property economist at the organisation, told the Daily Mail: "Over the next few years, we expect UK house prices to give back some of their recent gains. We have pencilled in house price falls of three per cent next year and three per cent in 2009."

He also claimed that a downturn in the London market, which has been buoyant in recent years, could be one of the drivers behind a price fall across the rest of the UK.

However, the findings appear to contradict the latest house price figures released by the Halifax in which Martin Ellis, chief economist at the firm, said: "Sound market fundamentals, including high levels of employment and a shortage in the number of properties available for sale, will continue to support house prices."