House prices dropped another 2.2% in October this year, according to the Halifax, contributing to a 13.7% drop over the last 12 months. This means the average UK home now costs 168, 176 pounds, nearly 30k than exactly a year ago.
House prices are now back to the level they were in October 2005, and conditions remain challenging because of economic conditions and the shortage of mortgages being offered by financial institutions, particularly for first-time buyers.
In their survey of house prices across the country, Halifax found similarly gloomy results to those obtained by other banks in recent months, such as Nationwide, who reported a 14.6% fall in the last year.
But Halifax's chief economist, Martin Ellis, said there were signs that the market was starting to stabilise and that the affordability of homes were "improving significantly".
The house price to earnings ratio has fallen below 5.0 for the first time in four and a half years, and further improvements in this statistic are expected in the coming months.
The number of mortgages seems to have been largely unchanged for the past three months. Prices are falling faster than at any point during the 90s, so the likelihood is that the outlook will continue to deteriorate over the next few months.
The recently announced cut in interest rates by the Bank of England will go some way to helping, but the main issue is High Street lending rates and availability. Some lenders may try to recoup their losses by taking their time to pass on the savings to customers, which could lessen the beneficial impact of the Bank of England's interest cut.
Mortgage rates are expected to plummet as a result of the cut in interest rate, but the main barrier to particularly first-time buyers, is the hefty deposits required rather than the cost of servicing the mortgage.
Since the start of the credit crunch and global economic downturn last summer, lenders have decreased their lending, preferring to lend only to those who hold significant equity in their home or who are able to put down large sums of money as deposits when buying for the first time.
Banks are likely to restrict their lending even further in the coming months, before stability and growth creeps in. 100% and 95% mortgages are a thing of the past, and most deals currently on offer from high street lenders require a deposit of between 10 and 15 percent.
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