Nationwide Building Society has reported an 18 per cent drop in pre-tax profits.

The group made £322 million in the first six months of its financial year, down from £394 million a year ago.

It also posted rising losses from borrower arrears and the credit market crisis.

Its bad debts rose by more than a fifth to £74 million as borrowers struggled with repayments and Nationwide said it was forced to write down the value of assets by £416 million.

Chief executive Graham Beale said house prices would continue to fall by 1 per cent to 1.5 per cent a month at least for the remainder of the year.

But he added there was hope the market would see a turn around as the price falls and lower interest rates began to help buyers come into the market.

Nationwide was one of a number of lenders to pass on the Bank of England's 1.5 per cent base rate cut on standard variable mortgages last week amid reports that the Government had pressured them to make the cuts.

Mr Beale remained tight-lipped on the part played by the Government, but said there was "no conflict" between the interests of politicians and its members in the decision.

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