LONDON (Reuters) - Prime central London house prices are falling at the fastest rate since the early 1990s, data shows.

They went down 1.5 percent in May - the fastest rate of decline since the house price crash of the early 90s, according to estate agent Knight Frank.

That takes annual growth to just 12.8 percent, down from a high of almost 38 percent last August.

Liam Bailey, head of residential research at Knight Frank, said: "Up until April, London appeared to have escaped the worst effects of the credit crunch, but with the mortgage market in growing difficulties, the weakness seen across the wider UK market is now spreading to the prime London market."

Liquidity problems have seen lenders scrap cheap deals and cut the maximum amount they will lend and to whom in recent months.

Data from the Halifax, Britain's biggest mortgage lender, showed yesterday that British house prices overall fell a larger-than-expected 2.4 percent in May.

The weakest performance in the prime London market during May was seen in the sub-one million pound sector, where prices fell 2.3 percent, according to Knight Frank.

In the one to £2.5 million price bracket, prices dropped 2.2 percent.

However, at the top end of the market, prices are holding firm: £10 million-plus properties saw no change in value.

Overall, sales volumes in central London are almost 50 percent lower year-on-year, but sales of homes worth more than £10 million are up 40 percent.

Bailey expected prime central London property prices to slide further in 2008, with a five percent drop over the whole year being a "best-case scenario".

"With no improvement in the mortgage market, this decline could easily be well into double figures," he added.