HOME renovation would seem to be as exciting a spectacle as, well, watching paint dry. But as Britain neared the peak of a decade-long housing boom, it became prime-time television as producers rushed to make shows like “Property Ladder”. Those happy days in which acquiring a house seemed a sure bet have now ended and even the boost of a quarter-point rate cut from the Bank of England on April 10th is unlikely to bring them back.

Prices, which had been drifting slowly lower over the winter, have started falling more rapidly and dropped 2.5% in March, according to Halifax, part of HBOS and the country's biggest mortgage lender. The biggest monthly drop since September 1992 prompted widespread concerns in a country that still remembers its previous big bust, which started in late 1989 and from which prices did not fully recover for almost a decade.

Mortgage lenders and Labour politicians (see article) have talked down the significance of the drop, arguing correctly that monthly data is volatile and that other indices show a very different picture for the month. The Nationwide Building Society, another large mortgage lender, thinks that prices fell just 0.6% in March. What really matters is the annual rate of growth, which has slowed to 1.1%, the lowest since 1996, according to both lenders.

Worryingly, both estimates may already be out of date. Their data, which show that house prices have fallen about 4% from their peaks, are based on mortgages that are approved by lenders. Yet mortgage approvals capture only a portion of purchases—about a quarter of properties bought each year are paid for in cash—and take place only some weeks after a price is agreed. “The Halifax is behind where we are in the market,” says Marc Goldberg of Hamptons, an estate agent. “The prices we're getting now are about 10% down from the peak last summer.”

The drop should be set in the context of Britain's long boom in house prices; between the first quarters of 1997 and 2007 the price of an average home increased by 215% according to the Nationwide's index. Most homeowners are sitting on large gains, and have enough equity to shield both themselves and their mortgage lenders from quite a severe downturn. Experian, a credit-scoring firm, reckons that if house prices fell by 20%, only 78,000 households would have mortgages worth more than their homes, a tiny figure set against the almost 12m mortgages.

On the other hand, the big increases may mean that prices have much further to fall. The housing market has, in recent years, sustained much higher valuations than was previously thought possible. Compared with average earnings, homes are more overvalued than at the peak of the previous boom in the late 1980s (see chart below). They are also high compared with rents, which undermines the argument that the increase in property prices has been driven by low homebuilding rates.

The International Monetary Fund reckons that Britain's house prices are almost 30% higher than can be explained by fundamental factors such as disposable income, interest rates and the size of the working-age population. A crucial reason is that credit has been artificially cheap in recent years because investors have demanded too little return for the risks they have taken on. This has driven down the cost of borrowing and made loans available to many who might otherwise not have been able to borrow.

Datamonitor, a research firm, reckons that borrowers with spotty credit records account for about 7% of outstanding mortgages in Britain, with another 5-6% held by people who did not have to prove what their incomes were. Another 10% are held by landlords, compared with less than 1% a decade ago. Although this has proved a safe form of lending in recent years, no one knows whether people who have invested in houses may be quicker to sell when markets turn down than those who have bought houses to live in.

Turmoil in credit markets has now pushed up the cost of borrowing and forced many lenders to withdraw from the market. The most recognisable of these was hapless Northern Rock, but it is by no means the only one. Almost all lenders specialising in Britain's subprime market had stopped issuing new loans by the end of 2007 because they were no longer able to fund themselves with money raised in the international financial markets.

The number of different sorts of mortgages available to the riskiest borrowers has slumped from more than 9,500 to about 1,300 since August, says George Buckley, an economist at Deutsche Bank. This week Abbey National, part of Spain's Santander banking group, became the final mainstream lender to stop offering mortgages that allowed people to buy homes without deposits. Lenders have been demanding tougher terms and have been especially harsh on customers whose loans exceed 90% of the value of their homes. “We have reached a rare moment when lenders have pricing power and borrowers have none,” says a senior executive at one large lender.

The seismic shift taking place in mortgage markets suggests that the fall in house prices may be both deep and prolonged. Reluctant as mortgage lenders are to talk down the market, even the Halifax and Nationwide expect “modest” declines in house prices this year. But this seems Panglossian, to put it mildly.

One gauge of future house-price expectations is found in the property-derivatives market. In it investors are betting on prices falling by some 10% this year and another 4-5% next year, says David Miles, an economist at Morgan Stanley. That would mean a fall of about 20% in real terms.

Other forward-looking indicators also point to trouble. The Royal Institution of Chartered Surveyors reckons that in February the housing market—judging by the ratio of completed sales to unsold properties—was its weakest since 1996. Estate agents are having to work harder. Charles Peerless, who owns estate agencies near the City and in the West End, areas where prices are holding up relatively well, says each property is being viewed about 12 times before a sale, compared with just four or five viewings a year ago.

The Bank of England's cut in interest rates is unlikely to help the market that much. On recent form mortgage lenders are unlikely to pass on much of this week's rate cut. More important, once people begin to expect lower prices, it is very difficult to reverse a self-fulfilling downward spiral in the housing market. About the only hark-back to the go-go years may be found on television: a new season of “Property Ladder” started this week.