House prices dropped by 2.6 per cent in November, making the annual drop so far 14.9 per cent.

The drop of 2.6 per cent compared to October’s 2.4 per cent suggests that the de-valuation of property in the UK is continuing and accelerating slowly. In fact, the average house price today of £163, 605 is level with the £163,445 average price in July 2005.

However, today’s average house price remains 124 per cent higher than it was ten years ago in 1998. Nevertheless, the house price to earnings ratio which is seen as a key affordability measure is falling from its peak of 5.84 in July last year to 4.56 in November 2008.

In addition, the index pointed at an easing on household finances as inflation re-aligns itself and the cost of fuel and food falls.

Commenting, chief economist at Halifax, Martin Ellis said: “The combination of high house prices in relation to earnings, constraints on householders’ incomes and spending power and the decline in the availability of mortgage finance since the summer of 2007 has curbed housing demand. These factors are major contributors to lower house prices and activity.

“Lower house prices, however, mean that a key housing affordability measure – the house price to earnings ratio – is at its most favourable for over five years.”

However, mortgage lending should in theory become more readily available as a result of the Bank of England’s further interest rate cut to two per cent last week.

Following the last rate cut, experts are doubtful of the banks’ willingness to pass on the rate cut and stimulate the mortgage market as inter-bank lending rates are slower to fall than the base rate.

Speaking of the rate cut, chief executive at the British Bankers Association, Angela Knight said: “The rates at which the banks can borrow money are gradually but steadily coming down and where possible they are passing those on to their borrowers.”

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