The latest figures from the Halifax also show that the average price of a house is now £161,743. But the lender is still trying to be positive, saying that the quarterly figures are up 1% and this is a better judge of the market place.
‘The underlying trend, as measured by the latest three months compared with the preceding three months, showed a modest improvement in house prices for the second consecutive month in August,’ said Martin Ellis, housing economist at The Halifax.
‘As we have pointed out before, the current low volume of sales tends to make house prices volatile from month to month. The 1.2% fall in August follows three months when prices have risen. As a result, the more reliable quarterly change, which smoothes out some of the monthly volatility, shows a rise in prices of 1%,’ he explained.
He added that a recent decline in average mortgage rates has further boosted home affordability for those able to raise a deposit to make a new purchase. ‘Low interest rates are likely to continue to support the market whilst increased uncertainty about the economic outlook and pressures on householders' finances constrain demand. Overall, we expect broad stability in both prices and activity over the coming months,’ he said.
The industry wide number of mortgages approved to finance house purchase, a leading indicator of completed house sales, increased for the third successive month in July, to 49,200 on a seasonally adjusted basis, according to the latest Bank of England figures. In addition, approvals were 2.5% higher than a year earlier.
Despite rising to the highest level since May 2010, the number of approvals remains within the range of 45,000 to 50,000 per month where it has been since the beginning of 2010.
The average mortgage rate for a new borrower fell in July to 3.68% from 3.84% in June, further improving affordability for those that can raise a sufficient deposit to buy a home.
Ellis sais that the more than two percentage points decline in mortgage rates since the middle of 2007 has reduced typical mortgage payments for a new borrower from a peak of 48% of average disposable earnings in mid 2007 to 28% in July 2011.
‘This is significantly below the long term average of 37% over the past 25 years and is at its lowest since 1999. The recent decline in average mortgage rates has been driven by a fall in fixed rates,’ he added.
