Previously the lender, which has a 30% share of the market, thought prices would fall 15%.

Agents believe that the best bargains are to be had at the top end of the market. An analysis of Land Registry figures by largemortgageloans.com, the broker, showed that the number of properties priced at £1m or more almost halved between 2007 and 2008.

There were 5,302 £1m properties sold across Britain in 2008 — a 41% fall from the 9,003 sold in 2007.

Paul Welch of Largemortgageloans said: “There has been a huge correction for £1m homes during this downturn. Consequently, now is an ideal time to buy the dream home in London or the country pad, and many of our high net worth clients are looking to get in.”

However, lack of mortgage finance is proving an obstacle. Best-buy mortgages from HSBC and Chelsea building society — a two-year fix at 2.49% and a five-year fix at 4.5% respectively — have a maximum loan size of just £250,000 and £500,000 respectively.

The best rate for loans up to £1m is Abbey’s two-year fix at 3.65% with a fee of £995 for borrowers with a 30% deposit and five-year fix at 4.69%, again with a fee of £995 for borrowers with a 30% deposit.

Marsh & Parsons, the estate agent, reports that 92% of buyers in the past month at their Notting Hill, Kensington, Holland Park and north Kensington branches were cash buyers — and, of those, 42% were foreign.

In a move that could further block any turnround, lenders are increasing rates for borrowers who apply for a further advance — often used by those who need to borrow more to move home but are trapped in their existing deal.

Last week, Nationwide became the latest to do so, raising rates on further advances by 0.3 percentage points — or about £85 a month on a £500,000 mortgage.

While a two-year fixed-rate mortgage for an existing borrower with a 40% deposit looking to remortgage at the end of their term is 4.79%, the same borrower, who is not at the end of their term and wants additional borrowing on their same loan, will pay 5.88%.

Louise Cuming of Moneysupermarket, the comparison website, said: “Many of those looking for a further advance are tied in by the early repayment charge on their deal — so they don’t want to remortgage. They are between a rock and a hard place — if they have a further advance they pay well over the odds, but if they remortgage they have to pay the penalty to escape.”