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In a statement, the lender said: "Reducing prices will improve affordability, which should bring about a recovery in the first-time buyers' market."
Chief executive Graham Beale said he expects net new mortgage lending in the UK to have shrunk by at least one-third to between £20 billion and £30 billion this year.
CNN reports that during the first six months to the end of September, Nationwide's profits fell from £394 million to £322 million. The figure, which excludes merger costs and fair-value gains on derivatives and hedge accounting, represents underlying profits before tax.
Recent figures from the Halifax found that UK house prices fell by 2.2 per cent last month and are 15 per cent lower that the same time last year.
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