Low volume of sales leading to volatile monthly fluctuations in housing market

House prices have fallen by 1.2% month-on-month in August to according to the latest Halifax House Price Index - the first drop since April.

The Halifax HPI is the second industry indicator to report a monthly fall in house prices, coming a week after the Nationwide survey showed a fall of 0.6%.

According to the Halifax, the three-month trend shows a price rise of 1.0%. On an annual basis, prices in August were 2.6% lower as measured by the average for the three months to August against the same period in 2010.

Commenting on the figures housing economist Martin Ellis said: “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 1.0%.

“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.”

The Halifax also reported that the average mortgage rate for a new borrower fell in July to 3.68% from 3.84% in June, improving affordability for those that can raise a sufficient deposit to buy a home.