Halifax reports that house prices fell by 0.4 per cent in September, the third consecutive fall, continuing the trend of declining house prices shown by separate reports from Hometrack and Nationwide this week.
The data points to a further weakening of the UK property market and a likely downward trend that could see house prices continue to fall modestly in the coming months.
The Bank of England maintained base rate at 0.50 per cent for the 44th consecutive month. Its policy has helped to prop up house prices and allowed more people to hold onto their homes than in previous recessions.
Halifax says the average UK house now costs £159,486, 1.2 per cent lower than 12 months ago. This is the first time there has been a difference of more than one per cent compared to a year ago for seven months.
The drop is even worse becasue it does not take account of inflation.
Howard Archer, Chief UK & European Economist at IHS Global Insight said: “The 0.4% month-on-month drop in house prices in October matches the drop reported by the Nationwide and fully ties in with our view that house prices are likely to trend modestly lower over the latter months of 2012 and the early months of 2013 before stabilizing.
“Specifically, we expect house prices to drift down by around 3% from current levels in the face of limited market activity, still low and fragile consumer confidence, and muted earnings growth,” he added.
It says house prices on a quarterly basis, in the three months to September were 0.5 per cent lower than in the preceding three months, compared to a drop of 0.3 per cent seen in the three months to August.
Martin Ellis, housing economist, said: "Overall, there has been very little change in the average UK house price so far this year. There is, nonetheless, evidence of a slight deterioration in the trend recently with prices in the three months to September 0.5% lower than in the previous quarter.”
The Halifax says that home sales have remained steady in recent months. It says there has been between 75,000 – 77,000 per month between May and August. Overall sales in the three months to August were up by three per cent.
Low mortgage interest payments in relation to incomes are helping to support house prices. Mortgage payments as a proportion of net disposable income remain well below the historical average. The Halifax says this is the case for both first-time buyers and people remortgaging.
Martin Ellis said: "The generally weak economic climate remains a significant constraint on housing demand. The relatively low level of mortgage payments in relation to income, however, continues to provide support for house prices. We expect house prices to be broadly unchanged over the rest of this year and into 2013."
It says most homeowners spend 26 per cent of their net income on their mortgage compared to 48 per cent five years ago and the long term average of the past 27 years of 36 per cent.