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House prices drop a further 2.3%

House prices declined by 2.3% in February, more than offsetting January’s 2% increase, shows the latest Halifax House Price Index.

Prices in the three months to February compared to the previous three months – an indicator of the underlying trend – were 3.6% lower.

The index also shows house price to earnings ratio – a key affordability measure – is at its lowest for six years.

However the lender says there are signs of stabilisation in house prices albeit at a very low level.

It points towards Bank of England figures that show the number of mortgages approved to finance house purchase was unchanged between December 2008 and January 2009. While approvals in January, at a seasonally adjusted 31,000, were also identical to the monthly average recorded in the second half of 2008.

Martin Ellis, economist at Halifax, says: “The average UK house price declined by 2.3% in February. This monthly decrease more than offset January’s 2.0% increase. Prices in the three months to February compared to the previous quarter, which provides a better indicator of the underlying trend, were 3.6% lower.

“Continuing pressures on incomes, rising unemployment and the negative impact of the dislocation of the financial markets on the availability of mortgage finance are, however, likely to mean that 2009 will be another difficult year for the housing market.”

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