Figures from Halifax suggest that the decline in house prices might be starting to stabilise – Quarter three of 2008 saw the average home’s value fall 5.1 per cent, the same as in Quarter 2.

The average house price is now 172,108 – similar to what it was in January 2006 – down 12.4 per cent compared to the same time last September.

While some homeowners will bemoan the fall in value of their home, others who are trying to get on the property ladder will be glad to learn that the house price to earnings ratio is improving – having fallen from a peak of 5.84 in July last year to 5.02 in July this year – making it more affordable to buy a house. Halifax expects further improvements in the ratio as house prices continue to soften.

The average mortgage rate has also fallen, from 5.91 per cent last August to 5.83 per cent in August 2008, making borrowing more affordable but only for existing borrowers, who have seen their average rate fall from 5.91 to 5.83 per cent, while the cost of a mortgage for new borrowers has gone up 22 basis points in the same period, climbing to 6.10 per cent.

Coupled with the rising cost of living, not to mention the decline in availability of credit, mortgage affordability has made it increasingly difficult for potential new homeowners to enter the market, causing house prices and market activity to fall. Completed property sales were almost 50 per cent lower in August than they were at the same time last year.

“The ongoing pressures on householders’ income, combined with the reduction in the availability of mortgage finance,” said Martin Ellis, chief economist at Halifax, “mean that market conditions will remain challenging.”

But, Halifax is also hopeful that last week’s half a per cent cut in the Bank of England base rate “will help borrowers faced with increasing pressures on their finances and provide a valuable support to the housing market.”

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